Natural persons and companies living, respectively operating in the Netherlands are subject to taxation here. The main tax they all need to pay is the income tax
which in the case of natural persons is known as the personal income tax, while in the case of companies, it is referred to as the corporate tax.
Foreign citizens and companies are also imposed with the income tax in the Netherlands but only on the earnings they obtain here.
The income tax applied on natural persons in the Netherlands
Natural persons who live in the Netherlands
as citizens or residents will pay in the income tax
on several types of earnings. Among these, we mention the following:
income from work, such as wages, salaries, pensions and other earnings;
income from home ownership for those who live in properties they own;
interests, such as company shares or certificates and other financial assets;
income derived from savings and investments made here or abroad.
Based on the type of income, a taxpayer must check one for of the 3 boxes on their file returns. The Dutch income tax applied to individuals is also known as the Box System and implies the assessment of the levy to be paid on the boxed checked on the form.
Rates of the personal income tax in the Netherlands
The personal income tax is levied at progressive rates in the Netherlands which is subject to slight variations every year based on the annual income of the taxpayer. Generally speaking, the rates range between 36,6% and 51,75% every year.
You can read about the Dutch income tax in the infographic below:
The income tax applied to companies in the Netherlands
Dutch companies are also subject to the income tax, however, in their case, this levy is imposed at two rates – the first one is 19% and applies to taxable incomes of less than 200,000 euros, while the second one is 25% and applies to taxable profits of more than 200,000 euros.
Special tax regulations apply to investment institutions that do not pay the corporate tax
. Also, self-employed persons and sole traders are imposed with the income tax on their profits when filing their tax returns.
If you want to open a company in the Netherlands and need assistance or information about taxation, our consultants can guide you.
The Dutch Box System and the income tax
The Box System
is one of the simplest and effective ways of assessing a person’s income with the purpose of collecting taxes. There are 3 boxes an individual can check, and which refer to:
- the first box is checked for property ownership and employment-related income;
- the second box is checked when a person owns interests in one or more companies;
- the third box is checked when a person obtains income from investments and savings.
The Box System is also a great tool for assessing the income tax rebates, deductions and reductions a person is subject to. These are called tax allowances and it should be noted that the Netherlands offer many such allowances to citizens and residents of this country.
In order for a person to pay the income tax in the Netherlands
it must register with the tax authorities
How is the Dutch income tax applied based on the Box System?
Based on the assessment made under the Box System
, the following aspects should be considered:
- when it comes to incomes obtained by checking Box 1, the income tax is levied under one of the rates presented above (starting with 2021, only two tax brackets will remain);
- when it comes to income obtained from financial interests, the earnings are imposed with a tax of 25% (provided that the person owns at least 5% of the shares in a company);
- for savings and investments checked under Box 3, the income tax rate is 30%.
Foreign citizens and the Dutch income tax
Foreign citizens who do not live in the Netherlands but obtain income here are also required to file annual tax returns. Those who have lived here and moved in the course of a year can even benefit from substantial tax refunds for the taxed they paid in the Netherlands.
For complete information on the requirements to pay the income tax in the Netherlands
, please contact
our representatives. You can also rely on us for assistance in setting up a Dutch company.