Filing your Dutch tax return: How to get the best out of it!

Have you just arrived in the Netherlands or living and working here for a while and in need of tax assistance? Taxsight provides tax advice at a high level.

Dutch residents, in general, are obliged to file their annual personal tax return in the Netherlands if they have anything to declare that leads to a tax implication or in any case when the Dutch tax office sends a filing request. It is, however, also possible to file your taxes if you expect any refund on withheld payroll taxes or dividend taxes on stocks. 

The Dutch tax system

The Dutch tax system for individuals is split into boxes. There are three categories of taxable income; each referred to as a "Box", each with its own rate:

• Box 1 - Taxable income from work and main residency
• Box 2 - Taxable income from a substantial interest
• Box 3 - Taxable income from savings and investments

This article will provide you with more information on how to get your deductions in Box 1 and Box 3.

Box 1

Here are the aspects of Box 1:

Personal income tax return

The majority of people working in the Netherlands have an employer. Employment income is considered a personal taxable income in Box 1 in which payroll taxes are withheld by the employer.  

Payroll tax is, in principle, an advance payment of the personal income tax in Box 1. If it turns out that your taxable income should be reduced by any of the deductions, this could lead to a refund of the withheld payroll taxes. 

Deductions in Box 1

The deductions in Box 1 can be:

Mortgage interest 

The majority of the deductions in Box 1 are related to property. If you own a property that is considered your main residence, you could then qualify for a mortgage interest deduction. 
The interest paid to the bank can then be deducted from your taxable income.  Purchase costs for the property which are related to the mortgage are also deductible, for example notary fees or the fee for your mortgage advisor. 

Foreign workdays

In general, Dutch employers include all your workdays in your Dutch pay slip. Employees with a Dutch employer who spent workdays outside the Netherlands could, however, be eligible for a double taxation relief in the Netherlands. The employee could get a refund of the withheld Dutch payroll taxes related to these days.  

The refund could be granted if your Dutch employer, for example, cross charges these workdays to a foreign subsidiary or if you work for more than 183 days in a calendar year in that other country while you remain resident in the Netherlands.

Note that for US citizens who live in the Netherlands and have the 30% ruling application, these requirements are not always applicable. They could be eligible for a refund without fulfilling these requirements. 

Refund on the basis of your first tax return in the Netherlands

For your first year in the Netherlands, the immigration year, you have to file an M-form. This could result in a tax rebate if you were employed in the Netherlands for at least a part of the year.

This is due to the fact that payroll tax is withheld on the basis of a full year's employment, rather than pro rata. Furthermore, if you have only lived and worked in the Netherlands for a part of the year, you may be partially exempt from national insurance contributions, which could also result in a refund.

Other deductions

Some of the other tax-deductible costs are:

• Paid tuition fees
• Donations to certain registered charity funds
• Certain medical expenses which are not covered by healthcare insurance
• Paid premiums for additional private pension could be (partly) deductible
• Travel expenses to work (if more than 10 kilometres) made with public transport and not fully covered by the employer

Box 3

Here are the aspects of Box 3:

Taxable income from savings and investments

Dutch tax law mandates that all Dutch residents with investments, savings or property with a value of more than 30.846 euros (tax partners have a double threshold), need to declare these items in Box 3 of their annual personal tax return.

It does not matter where the assets are held. If you have assets outside of the Netherlands, you will also need to declare those.

The net assets (the fair market value of the assets after the deduction of the fair market value of the debts) are valued on the reference date of January 1 of the relating tax year. For the 2020 income tax return, the reference date is January 1, 2020.

Deductions in Box 3

If you hold stocks and receive dividends, you could claim the withheld dividend tax back in your tax return. 

In the case of Dutch dividend tax, the withheld tax will be refunded in any case. In case of dividend tax withheld on foreign stocks you could get double taxation relief on the due Box 3 tax. The double taxation relief is on the basis of the most tax treaties max. 15% of the received dividends.  

30% ruling and Box 3 

Note that if you fall under the 30% ruling, you can opt to be treated as a partial non-resident taxpayer. As a partial non-resident taxpayer, you and your tax partner do not have to pay tax on savings and investments in Box 3.

The only exception is real estate, specifically when the property is located in the Netherlands but is not your primary residence. This real estate will have to be declared on your personal income tax return.

It's important to know how best to fill out your tax return. Taxsight provides tax advice at the highest level.