Dutch residents are generally required to file an annual personal tax return if they have any taxable items to report or if the Dutch tax office sends a filing request. You may also choose to file your taxes if you expect a refund from withheld payroll taxes or dividend taxes on stocks.

If you live in the Netherlands, you are required to declare all your worldwide income and assets when filing your personal tax return, including any real estate holdings. It’s not just tax residents who must report their property; non-residents with real estate in the Netherlands are also required to make a declaration.

As a resident of the Netherlands, you are required to declare your worldwide income and assets, including any real estate. It’s not only Dutch tax residents who must report their property but also non-residents owning real estate in the Netherlands. Let’s explore when you become a Dutch tax resident and what needs to be reported.

When do you become a tax resident?

Your tax residency in the Netherlands is determined by a variety of factors, including where your permanent home is located and where you have the strongest economic ties (such as with your partner or children). Personal factors generally weigh more heavily than professional ones when determining your residency.

You become a Dutch tax resident once you move to the Netherlands with the intention to live and work there and register with the local municipality. From this point onward, you are subject to Dutch tax obligations, meaning you will most likely need to file an annual tax return in the Netherlands.

Your tax residency begins on the date you immigrate. For example, if you move on July 1, you become liable for tax in the Netherlands starting from that date.

Dutch Tax system overview

The Dutch income tax system is divided into three categories of taxable income, referred to as “Boxes,” each with its own tax rate:

• Box 1: Income from employment and main residence
• Box 2: Income from substantial interest in a company
• Box 3: Income from savings and investments

This article focuses on Box 1 and Box 3 and the various deductions available in these categories.

Box 1: employment income and deductions

Employment income and withholding tax

In the Netherlands, most residents are employed by an employer, and income from employment falls under Box 1. Dutch employers are responsible for withholding payroll taxes, which act as an advance payment on the personal income tax due in Box 1.

Deductions available in Box 1

Several deductions apply in Box 1, including:

• Mortgage interest: If you own a property that serves as your main residence, you may deduct the interest paid on your mortgage from your taxable income. This deduction is calculated based on the WOZ value (official property value) and is subject to the applicable tax rate.
• Other deductions: You can also claim deductions for expenses like paid tuition fees, donations to registered charities, certain medical costs not covered by health insurance, and premiums paid for additional private pensions. Travel expenses to work (if more than 10 kilometers) using public transport, and not fully reimbursed by your employer, may also be deductible.

First-year tax return (M-form)

If it’s your first year in the Netherlands, you will need to file an M-form, which may result in a tax rebate. Payroll tax is typically withheld based on a full year’s salary, even if you worked in the Netherlands for only part of the year. Additionally, if you only resided in the Netherlands for part of the year, you may be partially exempt from national insurance contributions, potentially resulting in a refund.

Box 3: tax on savings and investments

Reporting savings and investments

Dutch residents are required to declare any investments, savings, or property worth over €30,360 (double threshold for tax partners) in Box 3 of their tax return. This includes assets held both inside and outside of the Netherlands. The fair market value of these assets, minus any debts, is assessed on the reference date of January 1st of the relevant tax year.

Examples of Box 3 sssets and debts

Examples of assets that fall under Box 3 include:

• Savings
• Second homes or rental properties
• Stocks and other securities (if you own less than 5% of a company)

Tax rates for Box 3 in 2019

For the 2019 tax year, the following tax rates applied:

• €0 – €71,650: 0.58%
• €71,650 – €989,736: 1.34%
• Over €989,736: 1.68%

Second homes and Box 3

Properties that are not your main residence, such as second homes or rental properties, are generally taxed in Box 3. The tax is based on the property’s WOZ value minus any mortgage value, if applicable. Properties owned on January 1st of a given year must be declared in that year’s tax return.

Real estate abroad and double taxation relief

As a Dutch tax resident, you must report your worldwide assets, including real estate abroad. However, most tax treaties allocate the right to tax real estate to the country where the property is located. This means you must declare foreign property in your Dutch tax return, but you are eligible for relief from double taxation, which reduces the Dutch tax burden by the amount of tax paid abroad.

The 30% ruling and Box 3

If you qualify for the 30% ruling, you can opt to be treated as a partial non-resident taxpayer. As a result, you and your tax partner will not be taxed on savings and investments in Box 3. The only exception is real estate located in the Netherlands that is not your primary residence; this must still be declared on your Dutch tax return.