The tax system in the Netherlands

If you are about to sign a job contract and you will move to this country, it is very important to know all the details about the tax system in the Netherlands and what your obligations are as a worker. There are several categories of tax in the Netherlands, so it is important to talk about each of them, giving explanations.

The Dutch tax system

The Netherlands works like any other country in Europe. It has a set of laws and a government entity that regulates the Netherlands' tax system every year. Every person, whether a Dutch citizen or an expat, has to pay taxes if they earn and work in the Netherlands. Depending on your income, lifestyle, social status, number of children, or even where you live, taxes can be different.

Every person with an income will pay Dutch taxes to the Belastingdienst, i.e. the Dutch tax authority. You will have to pay most of the fees to this institution, so here are the most important ones.

Income Dutch tax - Inkomstenbelasting

Everyone who works and earns money in the Netherlands must pay income tax. Income is declared with the help of an annual declaration, aangifte inkomstenbelasting, which can be submitted both online and physically, directly at the headquarters of the Dutch tax institution. This tax will only have to be paid by people whose employers are not already paying the taxes. Income tax is also applied to independent activities.

Salary Dutch tax - Loonheffing

If your income tax are already paid,, you no longer have to pay salary tax on the income you earn. This payroll tax, Loonheffing, is paid by the employer to relieve the employee of the effort of paying their own payroll taxes. Payroll tax is the contribution any employee pays to the government. This includes pensions, unemployment and other social or medical benefits.

Dutch Tax  and Return Process

The Netherlands has a fairly high tax rate, which, depending on the income, can even reach 49.50% of the total income. Thus, you can end up paying quite large amounts in taxes. But there is a system of returning these taxes that helps you recover a smaller or larger part of the amount paid in taxes in the previous year. Depending on your social, financial and family situation, this tax refund process can be quite beneficial.

The fiscal year in the Netherlands runs from January 1 to December 31. Every Dutch citizen or expat worker will receive a letter called an aangiftebrief from the Dutch tax authorities in the post. The letter notifies you that you must complete the annual return for the tax paid in the previous year.

In order to be able to benefit from the return of the taxes paid the previous year, it is necessary to prove that there is an imbalance in your financial resources. Maybe your spouse has too little income or you have to pay housing installments. This also includes prepaid taxes or tax deductions for education, health, or other social costs. If you have certain expenses where tax has already been paid, they will be deducted from this annual tax return.

Netherlands taxes according to income

Tax rates in the Netherlands are calculated for three main income categories. Most expats who sign employment contracts with employers in the Netherlands will fall into Category 1, or Box 1, as it is called.

In Box 1, those with a maximum income of 69,399 euros will pay 37.07% in taxes.

If your income exceeds 69,339 euros, the taxes you will pay are 49.50%. 

Box 2 is the category of those who own companies and private firms. 

Box 3 is dedicated to investments and income from investments made in stocks, interests, properties, etc.

Conclusion

The financial system in the Netherlands is extremely advantageous for those who settle there and for workers who start a family and obtain Dutch citizenship.

Thinking of going to work in the Netherlands? Check out our job offer and check the availability of our places!