Taxes! Unescapable Nightmares Working in the Netherlands

Hi, everybody~ Glad to meet you on Wednesday!

For those who live and work in the Netherlands, the following “bluish” envelope must seem to be very familiar.

Yep~ This is a letter from the Dutch Tax Office (DTO). Once you see this shade in your postbox, it’s very likely that you are going to suffer some “financial losses”. 

What’s the highest in the Netherlands? The height of Dutch people?

Wrong! It’s TAXES!!! 

Whenever you get paid, buy cars and houses, get rid of some trash or even raise a cat, you need to pay taxes.

So how exactly does the Dutch tax system work? Welcome to the “costliest” tax world of the Netherlands！

Before we learn how the Dutch tax system operates, we should first get to know what types of taxes there are in the Netherlands. Here are three most common taxes you may run into when working in the Netherlands.

1. Income Tax (inkomstenbelasting)

Working in the Netherlands, you must pay tax for your income. You can file an Annual Tax Return (aangifte inkomstenbelasting) to declare your income tax by yourself; or you may choose to complete the declaration procedures with the help of Dutch tax consultants or accounting firms.

If you are employed by a company, then the major part of your income will be your salary, 

whose tax is directly deducted by your employer from it. This is called as Individual Income Tax (loonbelasting). 

If you are self-employed, you must calculate and pay your income tax through Annual Tax Return. On condition that you have income other than your salary (such as a stock dividend), you will also need to file your tax return through Annual Tax Return. 

Annual Tax Return/ATR (aangifte inkomstenbelasting)

Since the Individual Income Tax (IIT) is merely a pre-paid tax, you still need to declare your taxes through ATR even though the IIT has already been deducted from your salary. Therefore, you may eventually receive the mentioned “bluish envelope” at a certain point when necessary. Tax declaration is something that must be done so that your pre-paid tax can be balanced against other financial aspects of yours, such as: 

• your partner’s income

• loan on mortgage

• additional income, deposit or investment

• tax relief, like for expenses in research, medical care, etc. 

Do I need to file an ATR? 

In the Netherlands, the fiscal year is the calendar year, 1 January to 31 December. Every January, a letter from the Dutch Tax Office (DTO) will be sent to you, demanding that you should complete your tax declaration for the previous fiscal year. However, if your financial situation is simple enough to render an ATR filing unnecessary, you may not receive such a letter. You can call 08000542 (DTO) at any time to get information on whether you need to file an ATR or not. 

When is the deadline for filing an ATR?

The time period for filing an ATR is from 1 March to 30 April. In case of any special circumstance, you (or your accountant) may apply to the DTO for an extension (uitstel aangifte). If neither has an ATR been filed nor an extension been applied for by 1 May, you will receive a ticket from the DTO afterwards.

The tax penalties in the Netherlands

The DTO has increased the penalties for undeclared income since 1 July, 2015. The penalty for concealing the “true” state of one’s incomes and properties is raised from 30% to 60% and one may pay his fines up to 300%. Therefore, the only suggestion would reasonably be: pay your taxes legally and appropriately…

2. Payroll Tax (loonheffing)

The payroll tax is consisted of 1. the Individual Income Tax (IIT), which is deducted in advance by the employer from the employee’s salary, and 2. other types of taxes, mainly including the state pension, unemployment benefits and other Dutch welfares.

As the difference between the pre-tax wages and after-tax wages (the gross pay you receive), the payroll tax can be easily calculated. 

Here is a recommended website for payroll tax calculation: http://bit.ly/2CNjwLV

The relationship between income tax and payroll tax can be seen clearly from the following picture: 

（图略）图中单词翻译：

收入税Income Tax；工资税Payroll Tax；其他收入所需缴纳的税Taxes for other types of incomes；股票分红等stock dividend, etc.；养老金、失业津贴等state pension, unemployment benefits, etc.；个人所得税individual income tax

3. Value-Added Tax/VAT (BTW/omzetbelasting)

The DTO charges a certain percentage of sales tax (in addition to the sales tax itself) on the services or products provided by the enterprises and it’s called as BTW in Dutch. There are three most common percentage rates of BTW: 0%, 6% and 21%. Enterprises (including freelancers) must calculate their own BTW through a quarterly sales tax declaration (BTW aangifte) and then pay it to the DTO.