Personal Income Tax in the Netherlands

In the Netherlands is a progressive tax on wages, profits, social security benefits and pensions. Individuals living in the Netherlands and individuals, who do not live in the Netherlands, but who receive income from the Netherlands are liable for income tax. Residents are taxed on their entire income, regardless of the place of origin. Non-resident are only taxed on income directly connected wit the territory of the Netherlands. The system integrates tax with fees paid for the basic old-age pension system AOW, the pension system for partners of deceased people AnW, and the national insurance system for special medical care AWBZ. Below the term "tax" is used for the total.

Tax due date
Income tax returns have to be filed each year with the tax administration by April 1 of the year following the relevant tax year.

Tax rate
The Netherlands has partly a progressive tax rate. For a while, the highest income bracket in the Netherlands was 72 %, but now this is 52 %. The brackets are 2.45 %, 10.70 %, 42 % and 52 %. The first two brackets also contain the Social Security payments, making it effectively higher (premium national insurance is 31.15 %), also it is: 33.6 %, 41.85 %, 42 % and 52 %. The tax rates in the Netherlands are:

For taxpayers aged 65 or older (to be referred to as 65 and over) reduced rates apply for the first two brackets: 15.75 % and 23.5 %, respectively. The discount of 17.9 % of the income in these brackets corresponds to the AOW contributions, which are not owed by the AOW beneficiaries.

Personal allowance items
The personal allowance is an addition of various types of expenditure. The personal tax allowances reduce income before calculating the tax due. A personal allowance is involved if one or more of the following items apply:
• alimony paid and other expenditure on maintenance
• losses on loans to new businesses
• cost of living of children younger than 30
• medical expenses and other extraordinary expenditure
• expenditure on weekend visits by handicapped children of 30 years or older
• educational expenses
• donations
• expenditure on listed buildings situated in the Netherlands

Income from a substantial business interest
Income from a substantial business interest includes: dividends and capital gains. There is a flat tax of 25 % (in 2007 was 22 %) on income from a substantial business interest, usually meaning a shareholding of at least 5 % in a private limited company.

Income from savings and investments
The tax rate for income from savings and investments is 30 %. Expects with the 30 % ruling can opt to be exempted from taxation on savings and most of the investments. Amount 20 014 EUR (higher for 65 years and over with a low income) of the value of the assets is exempted.

Bc. Petr Gola