U.S. Income Tax Return Preparation and Advice for American Citizen (Expatriates) Living in Netherlands
Our Netherlands Phone Number: +31 20 808 1143At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and permanent residents living in Netherlands for over 13 years. Our clients hail from all parts of Netherlands - Amsterdam, The Hague, Rotterdam, Utrecht and Maastricht.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Netherlands and know how to integrate your U.S. taxes into the local income taxes you pay. Any Dutch income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Netherlands for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Unfortunately, unlike most countries in the world, you must also file your taxes on worldwide income so long as you are a U.S. citizen or green card holder. You always have the option to give up your U.S. citizenship - by following proper IRS and State Department procedures you can surrender your U.S. Citizenship and therefore cut off your obligation to file U.S. taxes in the future. You must surrender the Citizenship for non-tax avoidance reasons and then can usually only return to the U.S. for no more than 30 days per year for the subsequent ten years. This is another service that we have provided many clients in the past.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax and legal concerns; we look forward to working with you.
Below we include information on the Dutch Tax System for American expatriates.
General tax credit
All employees are entitled to the so-called general tax credit (algemene heffingskorting). This is a credit on your taxation through your employer. For non-working partners it is also possible to receive this tax credit, which can amount to Â2007 a year. Main condition is that you are at least 6 months living with a partner who is subject to Dutch taxes and has paid taxes on at least Â15.000. The general tax credit is applied through the provisional tax return form, which is available on the Tax Administration website (only available in Dutch).
Rent Benefit - Huurtoeslag
Are you planning to rent a home in the Netherlands? And do you spend a large portion of your income on rent? Then you may be eligible for a subsidy for the rental costs: the rent benefit. Whether you are eligible for the rent benefit depends on, among other things, your age, and living situation. You can apply for the rent benefit at the Tax Administration website. Or read more about rent benefits on the Monetos website.
Childcare Benefit - Kinderopvangtoeslag
Will your children be going to day care after you move to the Netherlands? Then you are most likely eligible for a childcare benefit. This is a subsidy to help cover the costs of childcare. In order to receive a childcare benefit, both you and your benefit partner must be employed or studying. You can also receive the benefit if you are not employed, but your chances of finding work are increased if you follow, for example, a re-integration programme via UWV (Uitvoeringsinstituut Werknemersverzekeringen / Employee Insurance Implementing Body) or the municipality. Furthermore, your child must go to a registered childcare organisation. Do you want to apply for a childcare benefit? You can do this at the Tax Administration website.
Health Care Benefit - Zorgtoeslag
Do you have a Dutch health care insurance? Then you may be eligible for a health care benefit. You must be over 18, have the Dutch nationality, and your income may not be too high. If you do not reside in the Netherlands but work abroad, and you do not have a Dutch health care insurance, you are not eligible for a health care benefit. Would you like to apply for a health care benefit? You can do this at the Tax Administration website. On the website of EURAXESS you can find a guide in English on how to apply.
Child benefit (Income-based) - Kindgebonden budget
Kindertoeslag Will you be residing in the Netherlands and do you have children under the age of 18? Is your income less than Â 46.700 per year? Then you are most likely eligible for a child benefit. You are required to receive or start receiving a family allowance. Alternatively, if your child is 16 or 17 years of age, you have to provide the majority of the child's care.
You will receive the child benefit from the Dutch Tax Administration. Applying for a child benefit is usually not necessary. You will automatically receive information if you qualify for a child benefit. However, the Tax Administration does not have sufficient data regarding some groups of society and is therefore not always able to determine automatically who qualifies for a child benefit. If you have not yet received information regarding a child benefit, but you think that you are eligible, you can apply for a child benefit yourself at the Tax Administration website.
Netherlands personal Income Tax
The Netherlands has a system of personal income tax known as the 'box system'. This box system works as follows. There are three boxes of income each with their own tax rate, one of which is progressive (Box 1) and two of which are fixed (Boxes 2 and 3). If the income in a box is negative it cannot be offset against positive income in another box. (There is only one exemption to this rule. In very special circumstances, losses of Box 2 income can be offset against positive income of Box 1.)
The boxes are:
- Box 1: Taxable income from work and home (only the main residence)
- Box 2: Taxable income from substantial interests in companies with limited liability (usually BV or NV)
- Box 3: Income from savings and investment.
Tax rate on Box 1 is progressive to 52%.
The taxable income which will be taxed in Box 1 includes business income, income from employment or former employment (pension), income derived from certain periodic payments and income from a person's main home. This income is reduced by a number of deductible items which, broadly speaking, are associated with this income. An important one is the interest paid on a mortgage for a main home. Tax rates in Box 1 for 2010 are:
Taxable Income in Euros Under Age 65 Above Age 64
EUR 0 - 18,218 33.45% (1) 15.55% (3)
EUR 18,218 - 32,738 42.00% (2) 24.05% (4)
EUR 32,738 - 54,367 42.00% 42.00%
Over EUR 54,367 52.00% 52.00%
1 Comprises income tax of 2.30% and 31.15% social security contributions
2 Comprises income tax of 10.80% and 31.15% social security contributions
3 Comprises income tax of 2.30% and 13.25% social security contributions
4 Comprises income tax of 10.80% and 13.25% social security contributions
If an individual leases a property to a BV (or NV) in which he or she has a substantial interest (of 5% or more), the resulting income and capital gains on that property are also taxed in Box 1.
One of the specific rules of the Dutch tax system is that interest paid on a mortgage to finance the main residence (only one per tax resident) is tax deductible. There are some specific rules which, in some cases, prevent full tax deductibility of the interest paid on mortgage. Other personal allowances include pension premiums and premiums for sickness allowances.
The tax rate on Box 2 is 25%.
The income from substantial interests is classified in this box. An individual who holds 5% or more of the shares (or profit-sharing certificates) of a private company with limited liability (BV) or a company limited by shares (NV) is considered to have a substantial interest. To determine whether an individual has a substantial interest, the shares of his partner, blood relatives or relatives by marriage are taken into consideration as well. Not only is income on the shares but also profits from the sale of such shares taxed in Box 2.
Income from savings and investments is taxed in this box and applies to both residents and non-residents. This box includes assets like investment portfolios, saving accounts and real estate (except the main residence which is classified in box 1). Income from assets in this box is fixed at 4% of the total net value (assets minus liabilities). This fixed income is taxed at a fixed rate of 30%, so the effective rate in Box 3 is 1.2% of the net equity (assets minus liabilities). Actual dividends, interests and rental income are not taxed separately. Withholding taxes on dividends on shares taken into account in box 3 are credited against the total income tax due. There are no local income taxes. A withholding tax (called 'wage tax') is levied on employment income. The rate of the wage tax equals the Box 1 personal income tax.
Individuals resident in The Netherlands are subject to personal income tax on their worldwide income. Foreign taxes on foreign-sourced income are normally relieved, either under double tax treaties or under Dutch unilateral rules. Non-residents are liable for personal income tax only on income derived from a limited number of Dutch domestic sources such as income received for duties performed within The Netherlands and income from Dutch real estate.
The residence of an individual is determined by actual circumstances. One of the most relevant considerations is whether the individual has permanent personal or economic ties with The Netherlands.
Income tax is a tax on the annual income of individuals which is levied at a progressive rate. Personal circumstances are, however, taken into account and certain expenses are deductible. There is a personal allowance (by tax credits) dependent on individual circumstances.
THE 30% RULING
In The Netherlands there are special conditions for certain foreign employees who work for a Dutch employer for a maximum of 120 months. They can obtain a 30% tax free allowance for extra territorial costs provided they perform activities in The Netherlands and have a special knowledge or capability which is not, or is rarely, available in The Netherlands.
Based on a resolution of 12 January 2010 of the Secretary of Finance for employees who work within a worldwide group and are sent to The Netherlands for fewer than 60 days over a 12 month period,, no Dutch taxes are levied under certain conditions.
Real property tax
Municipalities impose tax at varying rates on owners of real property in their municipality on an annual basis. Real property tax is not deductible for individual income tax purposes.
State social security contributions are payable by all individuals resident in the Netherlands. Additional social security contributions are payable by employees and the self-employed.
Net wealth/net worth tax Â None
Netherlands Tax Year - Netherlands tax year is the calendar year.
Tax Filing and tax payment Â The tax return must, in principle, be filed before 1 April of the next calendar year. Payment must be made upon assessment.
Penalties Â Administrative penalties may be imposed for late filing or failure to file a Dutch return, or the late payment or non-payment of tax. Criminal penalties are imposed if the Dutch authorities can prove fraud or gross negligence.
DETERMINATION OF TAXABLE INCOME
Corporation tax is levied on the taxable amount. This is taxable profit received in a year, less deductible losses. From 1 January 2007 onwards, the loss carry back period has been restricted to one year and the loss carry forward period to nine years. Under a transitional provision, losses sustained up to 2002 may be set off against future profits up to financial years starting in 2011. The taxable profit is also reduced by extra allowances such as investment allowances.
CAPITAL GAINS AND LOSSES
Capital gains or losses are assessed as normal corporate income and taxed accordingly. There is no special tax rate for capital gains.
For Dutch residents, the withholding tax can be subtracted from the total personal income tax to be paid.
As of 1 January 2007, losses may be offset against the taxable profits of the preceding year and carried forward for a period of nine years. For the (tax) years 2009 and 2010 the carry back period will be three years. However the carry forward period for these years is reduced from nine years to six years.
FOREIGN SOURCE INCOME
Foreign source income is included in the worldwide income of Dutch residents. However, in most cases, foreign source income is exempt from Dutch taxation, unilaterally or under double tax treaties.
Tax incentives are offered towards the cost of education and training projects, improvements in working conditions and research projects. Tax incentives are also applicable to companies investing in specified locations or developing new ideas, processes or products.
Beneficial tax rules are applicable to investments by individuals in companies that invest in environmentally friendly projects.
Dividends, whether paid to resident or non-resident recipients, are subject to withholding tax at 15%. A reduced percentage may be provided by a double tax treaty. Resident shareholders can offset this withholding tax against their corporate or personal tax liabilities. For non-resident shareholders, the withholding tax is a final tax.
Dividends paid by a Dutch company to a Dutch parent company that owns at least 5% of the paid up capital of that company are generally not subject to withholding tax. This equally applies to a dividend paid by a Dutch company to a European parent company that owns at least 5% of the nominal paid in capital or at least 5% of the voting rights if the tax treaty concluded between The Netherlands and the relevant EU state reduces tax on dividends on the basis of voting rights held.
Netherlands vat (Value added tax)
The standard VAT rate in the Netherlands is 21% (as of October 2012) with a reduced rate of 6% applying for certain goods and services. There is also a zero-rate.
The reduced VAT rate of 6% mainly applies to food, books, newspapers and drugs. The zero VAT rate mainly applies to goods and services involved in international trade so that goods can be exported free of VAT.