The Dutch Tax System, Three boxes
Like in most countries in the world, the primary source of tax revenue is taxation on labor, sales tax (VAT) and profit tax (corporate tax). 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 in three categories, called boxes, in the Netherlands:
- Box 1: income from work and home ownership
- Box 2: income from financial interest in a company
- Box 3: income from assets (savings and investment)
Box 1: income from work and home ownership
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 income tax section in the faq.
Box 2: income from financial interest in a company
If you own a minimum of 5 percent of the shares in a company, you are liable for 25 percent tax on income received from it. For more information see faq section income tax return.
Box 3: income from assets (savings and investment)
Income earned on assets is being taxed on the basis of a hypothetical return on a fixed return on savings and investments. The so-called wealth tax is calculated over a fixed asset amount brackets and amounts to approximately 1.3 percent tax on assets. Total Assets up to € 30,360 per person are not taxes in box 3. For more information see faq section income tax return.
Sales tax or value added tax (VAT) is a tax system that follows the EU regulations. Value added tax is calculated of three classes:
- Foods and essentials (9% VAT)
- Non-foods and luxuries (21% VAT)
- Special goods (0% VAT)
The applicable VAT rates are displayed alongside the classes listed above. The special goods class is comprised of:
- Goods that are exported
- Goods that haven’t been introduced yet
- Catch of Fish
- Excised goods
- International transport of people
VAT collection in the Netherlands is typically done by the entity that offers a particular good or service. On a periodic basis, usually quarterly, the VAT is reported and paid to the Dutch tax office by the collecting entity. VAT paid for by businesses can be retrieved from the Dutch tax office.
Businesses can apply reverse VAT charge for good or service to move the responsibility for reporting VAT from the seller to the buyer. This system avoids the requirement for businesses to register for VAT in the country into which it sells.
For more information about VAT see section small business support.
Businesses based in the Netherlands are subject to corporate tax on their worldwide income. The corporate tax rate (2019) is 19% for taxable amounts of up to € 200,000. For taxable amounts over € 200,000 a tax rate of 25% applies. Typically for Dutch corporate taxation, profits generated by a business entity, which is owned by another company is free of taxation. Losses and profits between companies part of a fiscal unity can be off-set among each other.
Various other forms of taxation
Other forms of taxation are property tax, inheritance tax, gift tax, transfer tax, gambling tax, motor vehicle tax and import tax (duties). Property tax is collected by the local authorities (municipality). Inheritance tax (successierecht) is charged for an inheritance received from Dutch residents. Dutch nationals are considered Dutch residents for further 10 years. Inheritance tax rate ranges from 10% to 40%. The current rate for transfer tax (overdrachtsbelasting), the amount of tax one pays over the purchase of real estate, is 2 percent. The gambling tax (kansspelbelasting) is 30.1 percent of any winnings over € 449, won in a chance game.
The Dutch tax office (Belastindienst/toeslagen) also handles the pay-out of allowances for specific purposes. An allowance is available in the Netherlands for formal childcare cost, rent expenses and health care cost insurance. For more information about allowance, see faq section allowances.
The import of goods into the Netherlands from outside the European Union is subject to import duties. These import duties can include excise duty, consumption tax and other levies. The Dutch Customs authorities (Belastingdienst/Douane) levy and collect the duty and transfer the sums collected to the EU. All EU member states apply duties conform the same Common Customs Tariff (CCT) system.
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