9 things to take into account when filing your tax return
February, 22nd 2019
1. It is all down to boxes
The Dutch tax system distinguishes three types of income for tax purposes. Each type of income is referred to as box 1, 2 or 3 and has its own tax rate. Box 1 covers taxable income from employment and home ownership, box 2 includes taxable income from income you have from shares in companies in which you have a ‘substantial interest’ and box 3 is used for taxable income from savings and investments.
2 Do you have to file an income tax return?
Probably yes. If you received notification from the Dutch tax office to file your income tax, then you have to do so even if you had no income. The letters are typically sent in February, so yours may have already dropped through your letter box.
If you live in the Netherlands currently or have done for part of the year you may also file a tax return voluntarily. You may, for example, expect a refund or you have received undeclared income. And who knows, perhaps you will be entitled to money back.
3 If you are a new arrival
Tax filing for the year you arrived in the Netherlands is different from filings for residents with a complete tax year. You become liable for tax the moment you arrive but you might find the tax office has a different date – such as the date you registered with your local council. The tax office should use the actual date you arrived, so if there is a discrepancy, let them know, via your tax advisor.
Please note that as a newcomer, you cannot use the online DigiD tax filing system. If you do, you will end up filling out the wrong form, as the system is designed for permanent resident tax payers. A tax advisor can help you get it right first time.
4 The 30% ruling
If you were recruited from outside the Netherlands and you meet the minimum taxable salary threshold of € 37,296 (2018), you might be eligible for the 30% ruling. This allows employers to pay staff 30% of their salary free of tax. The rules for benefiting from this tax break have become more complicated as of late, and a tax advisor can help you find out if you qualify. Find out more here
5 Worldwide income and double tax relief
Residents of the Netherlands and non-residential tax payers should report their entire worldwide income in their income tax returns. This worldwide income may include revenue which the Dutch tax office is not entitled to tax because of bilateral tax treaties.
To avoid a situation where you have to pay tax twice in both countries over the same source, the Netherlands grants a credit to compensate for the tax owed outside the Netherlands. This is commonly referred to as double tax relief.
6 Company cars (or bikes) If you have a company car and use it privately to drive more than 500 kilometres a year, you will have to pay tax on it. The tax is based on the value of the car when it was new, including taxes, and varies depending on how energy efficient the vehicle is. 2018 is the last year all electric cars were not taxed as a perk. Find out more.
Bizarre as it may sound, there are also specific rules if your company has provided you with a bike. They are somewhat complicated at the moment and the government pledged to reform them.
7 Mortgage tax relief and other tax breaks
The maximum amount mortgage holders can deduct from tax is gradually being reduced and last year the amount was cut to 49.5%. This means that if you are a high earner and pay 52% tax on some of your income, the mortgage tax relief break is only 49.5% – in other words, your mortgage will cost you a little more.
You may also be entitled to a tax relief on the cost of education and on some extra healthcare costs. So keep those big medical bills just in case.
8 Make sure you have a Digid All personal tax returns are supposed to be made online or via a special app, and that means you’ll need a DigiD, the personal identification number used for all contact with government departments.
It is no good trying to complete the form on April 30 and then discovering you don’t have the all important number, because it takes a few days to get one. Be prepared. However if you do not have a DigiD, you can still easily file your income tax return(s) with Blue Umbrella.
9 And if you miss the deadline? The Dutch tax year runs from January 1 to December 31. If you received an invitation from the Belastingdienst to file your taxes you have until April 30 to do so, unless you ask for an extension. The tax office is fairly relaxed about providing one. Dial the toll free number 0800-0543 and ask. If you file your taxes through a tax adviser, than he or she can request an extension (usually free of charge) for you.