The Dutch income tax system

When you live in the Netherlands, you qualify as a resident taxpayer. Resident taxpayers are taxable in the Netherlands for their worldwide income. Non-resident taxpayers are only taxable in the Netherlands for certain Dutch sources of income. In both cases, you will be subject to Dutch personal income tax.

For personal income tax purposes 3 types of taxable income are distinguished. These income types have been classified into 3 boxes:

Box 1: taxable income from work (including pensions/life annuities) and home ownership
Box 2: taxable income from a substantial interest
Box 3: taxable income from savings and investments

The tax rates in box 1 are progressive (1,85% - 52%). Box 2 and 3 have flat tax rates of 25% and 30% respectively. These tax rates are for 2011.

In general employment income is subject to Dutch wage tax withholding by the employer. The Dutch wage tax withholding will be settled with the Dutch personal income tax liability.

An expat living in the Netherlands who is granted the 30%-ruling, may choose to be considered partial non-resident taxpayer. This implies that the foreign employee is only taxable in box 2 and 3 for certain Dutch sources of income.

 For more information please contact our tax specialist.