Being an expat (or even a Dutch citizen) in the Netherlands requires you to pay certain taxes primarily based on earnings. The Dutch tax office (referred to as Belastingdienst) gathers taxes from a number of sources in order to help fund a number of social programs that all Dutch nationals and expats benefit from. To establish a clear view about the Dutch taxation system a guide about the type of taxes available in the Netherlands is drafted below:
Income tax
The income tax (also known as inkomstenbelasting) is a tax incurred on those who work or earn money in the Netherlands, this tax is taken as a percentage of your income. You may declare your income-tax using the annual tax return site (aangifte inkomstenbelasting), or if you find yourself bewildered by what to do you can always get help from a Dutch tax advisor available to you.
Usually, companies will deduct your income tax from your salary prior to receiving your salary, such a tax is referred to as a “wage tax” and is part of the payroll tax. However, when you are self-employed you are required to perform tax calculations on your own and pay income tax using the annual tax return.
The tax rate in the Netherlands is divided according to the three income boxes:
Box number one: this box focuses on taxable income coming from profits, employment, and owning a home. As of 2022, if you earn up to 69,398 euros, you are taxed 37.07% of that income, if your income exceeds 69,398 euros you will get taxed 49.5%. That being said, all those who work have a general tax credit of 2,888 euros.
Box number two: income resulting from major interest is taxed at 26.9%.
Box number three: should you have capital savings and investments, this capital is taxed at 31%, however there is a tax-free capital limit of 50,000 euros in the Netherlands.
Payroll tax (loonheffing)
The system of payroll tax is defined by tax and contributions which are held from an employee’s wage, by the company which removes the pressure from the employee of having to calculate and pay taxes as an independent worker would.
This type of tax constitutes a tax on the employees wage, contributions made for pensions, allowance provided in case of unemployment and other benefits provided by the Dutch government.
Expats as such need to be informed about the payroll tax, as there is a substantial difference between a gross salary which is the salary prior to tax deductions, and the net salary which is the salary that is received post tax deductions. Make sure that when applying for jobs it is clearly states whether the salary provided is gross or net, specifically if it comes to signing new contracts.
The year 2022, has shown a tax rate starting from 2.3% to 52% according to income bracket. This may prove to be a substantial number as income tax in the Netherlands is the highest in the world, however rest assured it all goes to much needed social programs.
VAT (omzetbelasting)
The Dutch tax office also collects a sales tax on goods and services which added directly to the price of the product that you pay for. Goods and services are taxed on a three-level basis as:
0%, 9% and 21%. Necessities such basic food items are usually taxed at the lower level of 9%.
