How does the annual Dutch income tax return work?

Date:2020-12-02 22:54

How much are you required to pay taxes? | HOITALENT

The article last week provided an overview of different kinds of tax in the Netherlands. You can get more information about the Dutch tax system through this link if you still feel puzzled

Here today let’s talk about what you need to know about the annual Dutch tax form!

As we mentioned last week, if you earn money or are working in the Netherland then you need to pay tax on your income. The time period for submitting your annual income tax return is from March to April. Income on the Dutch tax return in the Netherlands is divided into three categories: 

Box 1: Income from salary and house

Box 2: Income from interest in a limited company

Box 3: Assets and savings

Now let’s see the detailed information of each box!

Box 1. Income from salary and house

Box 1 income includes wages from your job or employment, rent income and other service revenues, such as income from royalties and gratuities. Income in Box 1 is taxed at four different rates depending on how much you earn, with a maximum rate of 52%. By the way, all the salary mentioned here is your gross salary. Check the Box 1 tax rates for 2017:

Here is a sample tax breakdown for an annual gross income of 30.000 euros:

The first 19.982 euros will be taxed at 36.55%, so tax will be 7.303 euros.

The remaining 10.018 euros will be taxed at 40.8%, so tax will be 4.087 euros.

Therefore, you will pay a total of 11.390 euros tax. 

Box 1 income includes, amongst others:

- Wages from your job or employment (including the company care and so on), income from pension and benefits. 

- Income from your business

- Income as a freelancer, artist, childminder or professional athlete.

- Gratuities such as tips

Box 1 deductions include, amongst others:

-Deductible costs of home ownership.

- Alimony

-Specific medical expenses.

-Temporary stay at a home for the severely disabled.

-Tuition costs and other study.

-Maintenance of a heritage listed building.

- Waived venture capital

Box 2: Income from interest in a limited company

Box 2 covers income from a substantial interest or holding (at least 5%) in a limited company such as a NV or a BV. Your income in Box 2 is taxed at 25%. 

Box 2 income includes:

Regular benefits such as dividends.

Capital gains, such as gains on shares.

Box 2 deductions include, amongst others:

Deductible costs 

Contra losses caused by significant interest 

Box 3: Assets and savings

Box 3 covers income from assets such as savings and investments. The value of your assets, minus debts, is calculated once annually, on January 1, to determine your net capital value. It assumes you earn an income (voordeel) of 4% from the value of your assets. This income was taxed at 30%. Everyone is entitled to an amount of tax-free capital (heffingsvrij vermogen).

2017 tax-free capital amounts

In 2017 you can have assets with a value of up to 25.000 euros as an individual, and 50.000 euros as a couple, without them being taxed.

If you are above retirement-age then these values are higher.

Tax on capital above the tax-free amounts is calculated according to this table:

Box 3 assets include:

Stocks and shares (if less than 5 percent)

Bank and savings accounts.

A second home or investment property.

Endowment insurance policy (if not connected to an owner-occupied residence).

Box 3 exemptions

The property you live in (if you own it).

Moveable property such as furniture, art or a car (unless they are an investment).

Certain kinds of insurance.

Investments in forests, nature or certain green, social, ethical, cultural or startup projects.

In a few months, you will declare your income tax via your annual tax return. We hope this article will be helpful in calculating your income tax. 

By the way, if you are interested in other tax benefits, don’t forget to follow HoiTalent and read the article next Wednesday!

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