FREQUENTLY ASKED QUESTIONS ABOUT DUTCH TAX DEFINITIONS
Aggregate family income is your total (gross) income formed by your combined income of your boxes 1, 2 and 3. If you have a tax partner throughout the whole year, you must also take this partner’s income into account.
The combined income levy is the aggregate amount – after application of double tax relief facilities – of the tax owed on the taxable income in the three boxes and the national insurance contributions calculated in accordance with Article 10 (1) and (2) of the National Insurance (Funding) Act.
The national insurance contributions owed are calculated on the contribution base. The contribution base is derived from the taxable income in Box 1. The contribution base also includes income received abroad that is not subject to income tax in the Netherlands.
If your income is (almost) entirely subject to taxation in a country other than the Netherlands, it is possible that some deductible items do not result in a refund of income tax in the Netherlands. In that case, these deductible items will be reserved. If you receive income in the Netherlands in the future, double tax relief will be granted in retrospect with regard to the reserved amount, and you will receive a tax refund or reduction. This is known as the deferral facility.
The employee insurance schemes are specifically applicable to staff in paid employment. The contributions under these schemes are paid by the insured person’s employer to the Tax and Customs Administration. The contributions are made to cover various insurance schemes, including:
- occupational disability insurance scheme (WAO or WIA);
- unemployment insurance scheme (WW);
- health care insurance scheme (ZVW);
- sickness insurance scheme (ZW);
Subject to certain conditions, the employee insurance schemes entitle employees to a benefit or provision. The Employee Insurance Implementing Body (Uitvoering Werknemersverzekeringen, or UWV)pays the benefits in the event of occupational disability, unemployment or sickness.
A fictitious disposal is a legal act or other event that does not involve a proper disposal, but is nevertheless regarded as a disposal by the law.
Immigration is involved if you move to a country other than your country of origin with the intention to take up residence in that country.
The income from a substantial interest is the aggregate amount of:
- the benefits you receive on shares or profit-sharing certificates that are part of a substantial interest (regular gains), reduced by the deductible expenses; and
- the profits you realise upon the disposal of shares or profit-sharing certificates that are part of a substantial interest, or upon the disposal of a part of the rights pertaining to these shares and profit-sharing certificates (capital gains), reduced by the deductible expenses;
The income from employment and home ownership is the aggregate amount of:
- taxable profits from business activities;
- taxable wages;
- taxable income from other activities;
- taxable periodic benefits in money and kind;
- taxable income from an owner-occupied property;
- negative expenditure on income insurance;
- negative personal allowance items;
- expenditure on income insurance;
- expenditure on childcare;
- personal allowance;
A kilometre record is a record in which all journeys made with a particular car – both for business and for private purposes – are registered. This record should meet specific requirements.
Like wage tax, national insurance contributions are levied on the employee’s wages. The employer paying the wages has to withhold these contributions from the employee’s wages and remit them to the Tax and Customs Administration. The following national insurance schemes apply:
- statutory pension insurance scheme (AOW);
- surviving dependants’ insurance scheme (ANW);
- child benefit insurance scheme (AKW);
- exceptional medical expenses insurance scheme (AWBZ).
Most of the national insurance schemes are administered by the Social Insurance Bank (Sociale Verzekeringsbank, or SVB). The SVB is not responsible for levying and collecting the contributions (this is the task of the Tax and Customs Administration), but sees to the implementation of the national insurance schemes.
You are a non-resident taxpayer if you are a natural person who does not live in the Netherlands, but receives income from the Netherlands.
The notional rental value is the benefit from home ownership that is established by using a statutory table and should be added to the income from employment and home ownership. The notional rental value is a percentage of the value of the owner-occupied property. This value is determined in accordance with the Valuation of Immovable Property Act (Wet waardering onroerende zaken, or WOZ).
An owner-occupied property is a property to which you or your partner hold the (beneficial) title and which serves you (both) as principal residence on a permanent basis. In certain situations, there may temporarily be two owner-occupied properties. For tax purposes, the following properties can also be regarded as owner-occupied properties:
- a property (principal residence) of which you have the usufruct, if this usufruct was obtained by inheritance;
- a membership in a cooperative apartment association (principal residence);
- a houseboat (principal residence) with a permanent mooring place;
- a caravan (principal residence) with a permanent site;
Payroll tax is an advance levy in respect of income tax and social security contributions. The Dutch Tax and Customs Administration is responsible for levying wage tax and social security contributions. Wage tax and social security contributions together are often called payroll tax, because they are withheld and paid by the withholding agent as one amount.
Under the so-called ‘private use’ facility, an amount is added to your income if you use a car made available by your employer also for private purposes. This facility also applies if you run a business and use a company car for private purposes. The amount of the addition depends on the extent of the private use, but is at least 0 to 25 per cent of the value of the car. If the actual value of the private use exceeds the addition calculated on the basis of the statutory percentage, this higher value will apply.
A protective assessment is an assessment by which the amount of tax owed is determined, but usually not collected. The income tax owed on the income subject to a protective assessment is calculated separately and shown in a protective assessment. If matters take a course considered undesirable by the legislator – e.g., if pensions are commuted after emigration – the protective assessment will be implemented retrospectively.
You are a recipient if you, as a Netherlands-based (legal) person, temporarily use the services of one or more non-resident employees who have been made available to you by a supplier.
The reference date is relevant for the taxation of income in Box 3. The reference dates are 1 January and 31 December. Different reference dates apply at the beginning and end of a person’s tax liability in the Netherlands, upon birth or immigration and upon death or emigration.
You are a resident of the Netherlands if you live in the Netherlands. The Tax and Customs Administration decides whether you live in the Netherlands by reviewing the facts and circumstances pertaining to your situation in relation to each other. Such facts and circumstances include the duration of your sojourn in the Netherlands, the centre of your social life, your family’s place of residence, your place of work, etc.
You are a resident taxpayer if you are a natural person who lives in the Netherlands.
A second home is a property that is not your principal residence. If this (second) home is available to you during more than 30 per cent of the year and is situated in the Netherlands, it will be taxed in Box 3 on its so-called WOZ-value, i.e. the value for the purpose of the Valuation of Immovable Property Act. If the property is available to you during less than 30 per cent of the year, or is not situated in the Netherlands, it will be taxed in Box 3 on its market value.
If you came to the Netherlands through a secondment arrangement, the Dutch Tax Office usually regards the Dutch based organization as employer, which is therefore liable for payroll taxation. The 183 days rule doesn’t apply.
The Dutch Tax Office qualifies you as a Dutch employee of the Dutch based organization if the following three conditions apply:
- You follow (work) instructions from the Dutch based organization;
- The Dutch based organization is liable for and benefits from your labor results
- The full labor expenses are (directly or indirectly) paid for by the Dutch based organization
A social security treaty is an agreement between two or more countries that provides rules for determining under which social security system a person is insured.
A substantial interest is involved if you – whether or not together with your partner – meet one of the following conditions, either directly or indirectly:
- You own an interest in a company comprising at least 5 per cent of the issued share capital, either in the form of shares or in the form of call options on shares.
- You own profit-sharing certificates, entitling you to at least 5 per cent of the annual profits or to at least 5 per cent of the distribution made upon liquidation.
- You are entitled to at least 5 per cent of the votes in the general meeting of a cooperative.
When staff is supplied to Dutch businesses, the term ‘supplier’ refers to the non-resident (legal) person who makes non-resident employees available in the Dutch labour market. This term covers both employment agencies that are specialised in supplying staff and employers who occasionally make an employee available in the Dutch labour market.
The worldwide income is the total income in Boxes 1, 2 and 3, earned anywhere in the world and computed in accordance with the Dutch tax rules. Therefore, the worldwide income also includes the revenue which the Netherlands is not allowed to tax under national and international regulations. Examples of such revenue are income from employment, profits from business activities or capital in countries other than the Netherlands.
In the following situations, the Tax and Customs Administration will qualify you as a tax partner:
- You are a spouse not living permanently separated.
- You are a registered partner not living permanently separated.
- You and an unmarried adult elect to be regarded as each other’s tax partners, and meet the following conditions:
- You ran a joint household for more than six consecutive months during a particular calendar year.
- During that period, you were both registered at the same address in the municipal records.
- If you are cohabiting as parent and child, you should both be 27 years of age or older at the start of the calendar year.
A tax treaty is an agreement between two or more states, the main purpose of which is to prevent certain revenue from being taxed twice. In the treaty, the contracting states record in what way the right to tax is to be allocated between them. For an overview of the states with which the Netherlands has concluded tax treaties.
Which country levies tax on your income is usually agreed upon through a (bilateral) tax treaties. This to avoid double taxation on your income. The Dutch Tax Office set up such a treaty with over 100 countries. If no treaty exists, the Dutch Tax Office decides which country levies tax on your Dutch income.
The tax treaty usually determines that the country in which you work (work country) levies tax on your income. The home country (i.e. the country in which your resided 183 days and over) instead can levy tax on your income if the following three conditions applies:
- You resided in the Netherlands (work country) for less than 183 days of the applicable calendar year;
- Your employer is not based in the Netherlands;
- You have not set up a representative office (fixed and defined office premises) for your employer in the Netherlands
Note: in case of a secondment of an employee, the 183-days rule is usually not applicable. See under secondment of an employee.
The total tax credit is the aggregate amount of the tax credit for income tax purposes and the tax credits for purposes of the AOW, ANW and AWBZ schemes respectively.
Wages paid to an employee and benefits paid to a benefit recipient should be reduced – inter alia – by wage tax which tax should be remitted to the Tax and Customs Administration. Normally, the wage tax is an advance levy in respect of the income tax owed. This means that wage tax already paid is usually offset against the amount of income tax owed.
If you pay wages or benefits to an employee or a benefit recipient, you have to withhold wage tax and social security contributions (together also known as payroll tax) from these wages, and pay them to the Tax and Customs Administration. If you have to withhold and remit payroll tax, you will be known as the withholding agent. You are also obliged to withhold and remit payroll tax if you made staff available, i.e. if you are a seconder, supplier, etc.
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