It is compulsory for every individual that resides in the Netherlands to pay taxes. Government expenditures that are (partially) paid for by tax revenues include health care, education, the judicial system, police, road construction/maintenance, social security benefits, care for the elderly and subsidies for housing. The Tax Administration Authority (Belastingdienst) is responsible for tax collection and social security contributions.
If you live in the Netherlands, you will qualify as a resident taxpayer. If you live abroad and receive income from the Netherlands which is taxable in the Netherlands, you qualify as a non-resident taxpayer. In both cases you will be subject to Dutch income taxation.
There are three types of income on which taxes are levied:
- Income from employment and home ownership (box 1)
- Income from a substantial interest (box 2)
- Income from savings and investments (box 3)
This is referred to as ‘the box system’. These taxes will be calculated on the basis of your yearly tax return. The wage (income) tax, which is deducted from your salary, will be settled against the income tax liability that arises from the tax return.
Resident taxpayers of the Netherlands, and non-resident taxpayers opting for resident taxpayer status should report their world-wide income on their income tax returns.
All taxpayers are entitled to a general rebate against the tax owed: the general levy rebate. On top of this you may qualify for supplementary rebates against the tax owed.
Where possible partners are taxed individually. This means that they pay tax on their own income and can only utilise their own deductible allowance. The Dutch tax system does recognise a number of types of joint income and deductible allowances. Fiscal partners can allocate joint income and deductible allowances to each other, which can result in a tax advantage.
Council, Water and Municipal Taxes
Alongside central government, three other governmental bodies are permitted to levy taxes. These are the County Council (Provincie), the Municipality (Gemeente), and the District Water Board (Waterschap). The County Council imposes a number of environmental taxes. Examples of municipal taxes are property tax and the dog license fee. The District Water Board mainly levies taxes related to water pollution. You should receive a letter by post to notify you when these must be paid.
An explanation in English of the different municipal taxes, and frequently asked questions about them, can be found if you visit this website.
At the beginning of every year, a form for the previous tax year becomes available on the Tax Administrations (Belastingdienst) website.
People who have migrated to the Netherlands during the previous year will receive a so-called M form. This form is not available online and will be sent to your home address. You can also order this form by calling the Belastingdienst on 08000543.
Non-resident taxpayers (individuals whose main place of residence is outside the Netherlands) are required to complete the so-called C form. This form is also available on the Belastingdienst website.
Besides the annual tax return forms, preliminary tax return forms for the current year are also available. Such forms enable you to claim tax refunds in an earlier stage. If you use these forms, you will not have to wait for the final settlement following your declaration at the end of the year to receive any refund you may be due.
Although it is the tax administration's goal to make tax matters as easy as possible for you, a basic understanding of the system is still necessary. Due to the fact that you have been recruited from abroad and your personal circumstances may differ from those of Dutch native inhabitants, it may be beneficial to seek assistance from a tax advisor who specialises in international tax issues.
The M Form - Tax Return
The M Form (Migration Form) is the tax form you must complete the year you move to or from the Netherlands.
The purpose of this form is to declare that you did not live in the Netherlands the whole year.
It is likely you will receive a tax refund.
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