When you are planning to move to the Netherlands you will be treated as resident of the Netherlands for Dutch tax purposes. This means that the income you earn will be subject to tax in the Netherlands. Your income will be subject in the Netherlands to payroll tax and personal income tax

Payroll tax in the Netherlands


The wage you receive will in most cases be subject to Dutch payroll tax. The tax is withheld by your employer on your wage. Thus, in the Netherlands you receive your salary net of payroll tax. Your employer files the payroll tax returns and pays the payroll tax withheld to the Dutch tax authorities.
The 2009 Dutch payroll tax rate is 33.5% for the first EUR 17,878 income you receive. For the next EUR 36,897 the tax rate is 42%. For the excess income the rate is applied at 52%. These percentages are including the Dutch social security contributions that are levied.

Personal income tax in the Netherlands


The wage you receive will also be subject to Dutch personal income tax. This may look like your wage being taxed twice, i.e. with payroll tax and personal income tax, such is however not the case. As the Dutch payroll tax is an advance tax levy to the Dutch personal income tax, the payroll tax withheld by your employer reduces the amount of personal income tax to be paid. If the payroll tax withheld is more than the Dutch personal income tax due, you are even able to claim a payroll tax refund. Thus, your wage is only taxed once.

The Dutch personal income tax rates on your wage are similar to the Dutch payroll tax rates (reference is made to the above).

As a resident of the Netherlands your savings and investments will also be subject to personal income tax. The 2009 personal income tax on savings and investments is 1.2% and is levied over the fair market value of such savings and investments. The first EUR 20,315 (for 2009) of savings and investments is exempt from personal income tax.

A personal income tax return needs to be filed annually in the Netherlands. The tax return should be filed within 3 months after the calendar year-end.

30% Ruling – reducing the Dutch payroll and personal income tax


For expats an interesting incentive is available in the Netherlands. This incentive exempts 30% of your wage from payroll and personal income tax. This is the so-called 30% Ruling. 

The 30% Ruling is obtained by filing a request with the Dutch tax authorities. The ruling is granted by the Dutch tax authorities when you have specific skills that are rare on the Dutch labour market. The latter is in general the case when you are well educated or have sufficient working experience.
Another benefit of the 30% Ruling is that your savings and investments will be exempt from Dutch tax. This should be requested for in your personal income tax return.

As the 30% tax ruling is a very attractive incentive for expats moving to the Netherlands, it is recommended that every expat has it investigated whether or not he or she can obtain the 30% Ruling. After all, you do not want to pay more tax than necessary!

©Balthazar Tax Consulting