Moving to a new country is an exciting but complex process, and one of the key aspects to consider is taxation. As a resident in the Netherlands, you must comply with Dutch tax regulations, including filing an annual tax return. In this guide, Taxsight explains how the Dutch tax system works and what you need to know as an expat.
The Dutch tax system divides income into three categories, known as “Boxes,” each with its own taxation rules:
- Box 1: Income from employment and self-employment
- Box 2: Income from substantial interest (holding at least 5% of shares in a company)
- Box 3: Income from savings, investments, and other assets
Each category has its own tax rates and regulations that determine how your income or assets are taxed. Understanding these categories is essential for ensuring compliance with Dutch tax laws and optimizing your tax position as an expat.
Box 1: Employment and self-employment taxation
Box 1 includes income derived from employment, pensions, unemployment benefits, disability allowances, and alimony. Additionally, interest income from a personal limited company (B.V.) falls under this category.
Box 1 tax rates for 2024
- Income up to €75,518: 36.97%
- Income above €75,518: 49.50%
Taxation in Box 1 is progressive, meaning higher earnings are taxed at a higher percentage. The Dutch tax authorities apply payroll withholding taxes to ensure that employees pay their taxes throughout the year. However, individuals who are self-employed or who have additional taxable income may need to pay extra taxes when filing their annual return.
Deductible expenses to reduce your tax liability
You can lower your taxable income by claiming specific deductible expenses in your tax return, such as:
- Mortgage interest payments: Homeowners can deduct interest payments on their mortgage, which can lead to significant tax savings.
- Donations to registered charitable organizations: Contributions to officially recognized charities are tax-deductible.
- Medical expenses not covered by insurance: Certain medical costs that exceed a threshold may be deductible.
- Public transportation costs for commuting (over 10 km, if not reimbursed by the employer): If an employer does not fully reimburse commuting costs, these may be deductible.
- Alimony payments to an ex-partner: Spousal support payments can be deducted from taxable income.
Expenses deducted against the lower tax rate yield a maximum refund of 36.97%, while private pension and disability insurance contributions can be deducted at a maximum rate of 49.50%.
Box 2: Taxation on business shares and dividends
If you hold a minimum 5% interest in a Dutch or foreign company, any dividends received or profits from selling shares are taxable under Box 2. The taxation applies to both dividends and capital gains on the sale of shares.
Box 2 tax rates for 2024
- Up to €67,000: 24.9%
- Above €67,000: 33%
Taxation in Box 2 ensures that shareholders pay taxes on income derived from their business activities. If an individual owns shares in multiple businesses, all relevant dividend and capital gains income must be reported under this category.
Box 3: Taxation on savings, investments, and other assets
Residents with assets exceeding €57,000 (or €114,000 for tax partners) must declare these in Box 3. Taxable assets include savings, stocks, and real estate (except primary residences). Dutch tax authorities calculate a fictitious return on investment, which is then taxed at a fixed rate.
Box 3 tax rate for 2024
- 36% tax on fictitious returns:
- Savings: 1.03% (provisional rate)
- Investments: 6.04%
- Debts: 2.47%
Because taxation in Box 3 is based on estimated returns rather than actual earnings, taxpayers may end up paying taxes on gains they did not actually realize.
The 30% Ruling and its impact on taxation
Expats who qualify for the 30% ruling can benefit from a tax-free portion of their salary for up to five years. This ruling is designed to attract skilled foreign workers to the Netherlands by offsetting additional expenses associated with relocation.
From 2024, the tax-free portion is reduced in stages:
- First 20 months: 30%
- Next 20 months: 20%
- Final 20 months: 10%
The maximum annual salary eligible for the 30% ruling is €233,000. If an employee earns more than this threshold, the excess amount is fully taxable.
The 30% ruling & partial non-resident taxpayer status
Expats under the 30% ruling can opt for partial non-resident taxpayer status, affecting taxation in Box 2 and Box 3.
Box 2: If you own 5% or more of a foreign company, dividend payments may be exempt from Dutch taxation if the company is located outside the Netherlands. However, as of 2025, all Box 2 income must be declared.
Box 3: Expats under the 30% ruling do not need to declare foreign savings or investments but must declare Dutch real estate. From 2025, all assets must be declared, with a transition period until 2027.
Dutch tax filing deadlines and extensions
- Regular tax return deadline: May 1
- M-form (for new residents) or C-form (for non-residents): July 1
- Possible extensions: A few months, or longer if handled by a tax consultant
If you receive a tax assessment letter, filing is mandatory. Even without a letter, you should file if you expect a tax refund or have taxable income.
Get expert tax assistance
Navigating Dutch tax laws as an expat can be overwhelming. Taxsight specializes in expat taxation, payroll, and the 30% ruling. Contact us at +31 (20) 261 3221 or email info@taxsight.nl for personalized assistance.
