Anyone who resides or has previously lived in the Netherlands may be liable to Dutch gift and inheritance taxes. In this article, Taxsight explains how these taxes work in the Netherlands and the specific circumstances in which they may apply.
Overview of Dutch gift and inheritance tax
Gift tax in the Netherlands is applicable when a Dutch resident makes a gift to anyone, regardless of whether the recipient lives inside or outside the country. Similarly, inheritance tax is levied when a Dutch resident passes away, and it can apply even if the beneficiaries live abroad.
Dutch gift and inheritance taxes can also apply under specific conditions when the person involved no longer resides in the Netherlands. This may include situations such as:
- A Dutch citizen makes a gift or dies within 10 years after leaving the Netherlands.
- A non-Dutch national makes a gift within one year after leaving the country.
Gift and inheritance tax rates
The tax rates for both gifts and inheritances in the Netherlands are the same. The rates are applied as follows:
- For children and partners, the rate is 10% for amounts up to €128,750 and 20% for any excess.
- For grandchildren, the rate is 18% for amounts up to €128,750 and 36% for the remainder.
- For other individuals, the rate is 30% for amounts up to €128,751 and 40% for any excess.
Exemptions for gift and inheritance taks
Several exemptions apply to both gift and inheritance taxes, and they are important for reducing tax liability. For gift tax, there is a general exemption of €3,244 (as of 2021), which can be used each year. In addition, parents can make an annual tax-free gift of up to €6,604 to their children.
There are additional exemptions for larger gifts between parents and children, such as a one-time exemption of €26,881 for children between the ages of 18 and 40. This exemption can be increased to €55,996 if the gift is used for significant educational expenses. Also, individuals can make a gift of €105,302 to a person aged 18-40 without incurring tax, provided the gift is used for purchasing, repaying a loan for, or renovating a primary residence.
For inheritance tax, the main exemptions include €21,282 for inheritances from parents to children or grandchildren, and €671,910 between tax partners.
Business gift and inheritance tax
When a business is gifted or inherited, specific rules apply to ensure tax exemptions. Key conditions include that the business must be active, not passive, and that the previous owner must have held the business for at least five years if gifting it, or at least one year if passing away. The new owner must continue to operate the business for at least five years. Additionally, any income tax liabilities may be transferred to the new owner.
Need assistance with gift or inheritance taxes?
If you have questions regarding gift or inheritance tax or other tax matters, Taxsight is here to assist. With years of experience in both local and international tax issues, their team offers expert advice tailored to your needs.
