Owning a house in the Netherlands: Tax implications

Broadstreet has been advising professionals, entrepreneurs and expats on reaching their personal and financial goals for over 25 years. In this article, they explain how tax works on your worldwide assets.

Many expats in the Netherlands consider buying a house after several years of renting. Apart from the fact that you can save money on a monthly basis, buying a property could be a smart move for several reasons:
› you are eligible for a tax deduction on the interest on the mortgage.
› there are other tax reliefs if you are living in a listed building (Monumentenpand).

But what are your options if you decide to leave the country after a few years but have already bought a house? What are the tax implications if you decide to sell your house or rent it?

Buying a house in the Netherlands

If you are a Dutch resident and you own a house in the Netherlands, the paid mortgage interest is deductible from your Box 1 income (learn more about Boxes). If you do not earn income in the Netherlands and you pay interest on the mortgage, these costs are deductible in subsequent years.

Please note that the mortgage interest is only deductible if the house you own is considered your principal residence. If not, the value of the house and the value of the mortgage are taxed in Box 3 against a rate of 1,2 per cent. The value of the mortgage is then offset against the value of the house, and the balance is taxed at 1,2 per cent.

Moving temporarily to another country

In case you and your family move abroad, the general rule stipulates that you cannot deduct your mortgage interest against your Dutch income in Box 1 because the house is no longer your principal residence.

The house is then taxed in Box 3 against a rate of 1,2 per cent. In the situation that you decide to rent out the house, the rental yield is not taxed.

However, if you work abroad temporarily with the intention to return, the interest is, when certain conditions are met, still deductible in Box 1. The requirements are as follows:

› The house was your permanent home for a minimum period of one year (prior to the temporary departure) and you and/or your tax partner were the owner of the house.

› The house may not be used by others. This means that you are not allowed to rent out the house. However, there is an exception that your children can live in the house if they are younger than 27 years old.

› After the period of temporary leave, the house must qualify as your permanent residence.

› During the period of absence, you and your tax partner did not own another home that would be considered a permanent home. Renting a house abroad is not qualified as having a permanent home.

Selling the house

If you decide to sell the house, the mortgage interest is deductible under certain conditions. This also applies when you have already bought a new house. The interest of the newly-bought house can be deductible as well.

The interest is deductible for a maximum period of three years. This period starts after the calendar year in which the house no longer qualifies as your permanent home. Please be informed that the years in which you can still deduct will be reduced to two years as of January 2015.

The conditions are the following:
› The house is officially for sale
› The house needs to be empty. This means that no one else uses the premises.
› The house must have been considered a permanent home in at least one of the three previous years prior to putting it on the market.

While the house is for sale, you are still allowed to rent out the house for a short period on the basis of a temporary measure, but the mortgage interest during this period is not deductible, and the value of the house will be taxed in Box 3. The mortgage interest is deductible in Box 1 again from the moment the house is empty.

Please note that the house also needs to be for sale for the whole period while someone is renting it. However, this provision will be abolished in January 2015. As of then, the house will remain in Box 3 after transfer from Box 1.

Patricia van der Hut is a partner at Broadstreet, providing specialist tax and accountancy services to expats.