Income tax grouped in three boxes
Income tax is levied income, which can be derived from three different types of sources (boxes); work, business ownership and wealth. The tax rate depend on the amount of income and the income source. Per Residents pay tax over their worldwide income. Non-residents pay tax over income sourced in the Netherlands only.
The sources of income tax are grouped into three categories, called boxes, in the Netherlands:
- Box 1: income from work and homeownership
- Box 2: income from a financial interest in a company
- Box 3: income from assets (savings and investment)
Box 1: income from work and homeownership
The most applicable box for Dutch tax residents is box 1. A progressive tax rate system comprised of four (or actually three) brackets determines how much tax one pays over income. The tax rates (2019) varies between 36.65% and 51.75%. Expenditures or personal allowances can be deducted from one’s income to reduce the amount of tax due. For more information, see the income tax section in the faq.
Mortgage interest on property
In box 1, income from work and homeownership. an owner-occupant is allowed to offset mortgage interest charges and other expenses to purchase, maintain or improve the property. These annual expenses is applied as a negative income component in Box 1. This way, the taxable income amount in Box 1 is reduced to as an incentive to homeowners in the Netherlands. This tax credit facility cannot be applied to a second home in the netherlands or elsewhere.
Box 2: income from a financial interest in a company
Box 2 is taxation on substantial interest you, possibly in combined with your fiscal partner, own in a company ownership. This can come in the form of shares, profit certificates or options in any company in the world or in voting rights in a cooperative. If you own a minimum of 5 percent of the shares in a company, you are liable for a 25 percent tax on income received from it. For more information see faq section income tax return.
Box 3: income from assets (savings and investments), wealth tax
Income earned on assets is being taxed based on a hypothetical return on a fixed return on savings and investments. The box 3 is calculated over the net value of your assets, the economical value minus any debt obligations over it. If your net asset value is beyond a set ceiling for the relevant tax year no tax over it will be charged.
The asset or wealth tax is calculated in a system of brackets and amounts to approximately 1.3 percent tax on assets. Total Assets up to a set ceiling per person are not taxed in box 3. For more information see Income tax rates in The Netherlands.
The reference date for assessing one's Box 3 assets (savings and investments) is 1 January of the tax year over which you file your taxes. If you file taxes for - say - the year 2019, than the reference date for assessing the value of your world-wide assets is 1 January 2019.
Note that 30% ruling holders and their fiscal partner may be exempt from box 3 taxation.
Living and working in the Netherlands for a time? We can help you with your Dutch taxes, so you don't have to deal with the Belastingdienst yourself. Whether you're employed or have a small business, we'll make your life easier and save you money.