Netherlands

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Tax Policy

TAX POLICY

Netherlands Income Tax Rate 52%

Netherlands Corporate Tax Rate 25%

Netherlands Sales Tax / VAT Rate 19%

Summary

Tax rates in the Netherlands 2011   

Combined rates in Box 1 for persons younger then 65

Taxable income

Tax per bracket

Premium National Insurance

Total rate

Total per bracket

Cumulative

Of more then

But less then

 

 

 

 

 

 

 

 

 

 

 

 

€ 0

€ 18,628

1.85 %

31.15 %

33.00 %

€ 6,147

€ 6,147

€ 18,628

€ 33,436

10.80 %

31.15 %

41,95 %

€ 6,212

€ 12,359

€ 33,436

€ 55,694

42 %

 

42 %

€ 9,348

€ 21,707

€ 55,694

 

52 %

 

52 %

 

 

 

Rate Box 2 (income from a substantial interest in a limited company)

For the year 2011 the tax rate for income from a substantial interest is 25%.

Rate Box 3 (income from savings and investments)

The tax rate for income from savings and investments stays 30%. Expats with the 30% ruling can opt to be exempted from taxation on savings and most of the investments.

Tax credits

After the tax has been calculated based on the above percentages you can reduce the calculated amount with the applicable tax credits.

Personal tax credit -  € 1,987

Labour tax credit (max) € 1,574 / € 1,497

If you have children additional tax credits can apply. There are also other specific tax credits depending on your situation but the above are the common tax credits. The labour tax credit depends on the height of the salary and can be higher than € 1,574 / € 1,497 if you are 57 years or older.

Partuculary

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.

Box 1

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.

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.

Box 2

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.

Box 3

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.

Corporation Tax Rates

The corporate income tax rate for profits exceeding € 200,000 will be reduced from 25.5% (2010) to 25% (2011). The rate for the first € 200,000 of profit will remain 20%.

For tax years which deviate from the calendar year, the new rate applies to tax years starting on or after 1 January 2011.

Corporate tax is payable by corporations in The Netherlands (resident taxpayers) and by certain corporations not established in The Netherlands which receive income from sources in The Netherlands (non-resident taxpayers). The term corporation includes companies whose capital consists of shares, co-operatives and other legal entities which conduct business. The main types of corporations, as referred to in the Corporation Tax Act, are the joint stock company with limited liability (NV) and the closed company with limited liability (BV).

Taxpayers are obliged to file a tax return every year within five months following the end of the year concerned. An extension of this time limit may be permitted. Tax is payable within two months upon receipt of an assessment. A provisional assessment for the current year may be raised.

Local taxes

There are several municipal taxes of which real estate tax is the most important. Companies and individuals are subject to a municipal tax on the ownership and the use of real estate in The Netherlands, based on the market value of the property. The amount of tax due varies widely among municipalities but is generally a comperatively small percentage of value or income of the property in question.

There are no local income taxes in The Netherlands.

Other taxes

The Netherlands does not levy capital tax on the issued share capital of a BV and NV.

A 6% transfer tax is levied on the acquisition of real estatesituated in The Netherlands and rights related to Dutch real estate. Transfer tax is also levied on the transfer of shares in a so-called qualifying real estate company (in which 70% or more of the assets of the company consist of real estate and the object of the company is portfolio investment in real estate). The purchaser is liable for this tax.

Withholding tax

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.

Value added tax

The standard VAT rate in the Netherlands is 19% 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.

The period to which VAT tax returns relate may be a month, a calendar quarter or a year, depending on the amount of turnover tax (VAT) to be paid. The tax return must be submitted within a month of the end of the period to which it relates. The tax owed must also be paid within this period.
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Source:  http://www.expatax.nl/tax_rates_2011.htm