Netherlands Personal Income Tax

Residents are subject to income tax in the Netherlands on their worldwide income. Nonresidents are subject to tax on specific Netherlands-source income only.

Residence is determined based on circumstances. For Dutch residency, it is essential to determine whether the individual has a permanent bond of a personal nature with the Netherlands. For this purpose, specific circumstances (social, economic or legal) are not decisive; all personal ties are relevant.

Certain nonresident taxpayers may elect to be taxed as a resident taxpayer of the Netherlands. Furthermore, the 30% facility (see 30% facility) provides the option for residents of the Netherlands to be taxed as a “partial” nonresident taxpayer.

Income subject to tax. Netherlands income tax is levied on three categories (boxes) of income. Each box has its own rules to cal­culate taxable income, its own tax rates and exemptions. In gen­eral, negative income from one box may not be offset against positive income from another box.

Box 1 income. Box 1 income includes employment income, busi­ness profits and income from a primary residence. Profits received from personal business operations, from independent personal services and from certain shares of partnership income are taxed as business profits.

Tax on income in Box 1 is levied at progressive tax rates, with a maximum tax rate of 52% on income over EUR66,422 (see Rates). Wage tax is levied throughout the year (pay-as-you-earn) on employment income and directors’ fees if a Dutch wage tax withholding agent is available. The wage tax paid serves as an advance payment of the final income tax payable. Penalty taxes for employers can apply for excessive severance payments (rate of 75%) and certain early retirement payments (rate of 52%).

Employment income. Employment income includes salaries, wages, pensions, stock options, bonuses and allowances (for ex­ample, home leave and cost-of-living). Housing allowances may be taxable in certain situations. Some allowances for expenses may be paid as a tax-free allowance, subject to certain limitations and restrictions. The system of tax-free employment benefits and allowances is embodied in the new work-related costs scheme (werkkostenregeling; see Deductions and allowances). This new scheme has a major impact on employment conditions policy as a whole. Transition arrangements ended on 1 January 2015. Expatriates may qualify for a special tax regime, the 30% facility. This facility exempts 30% of certain employment income from taxation (see 30% facility).

Income and gains derived by private equity managers and other individuals from investments in which they are deemed to have a so-called “lucrative interest” is subject to the progressive income tax rates up to a maximum of 52% in a manner similar to entre­preneur income (the 30% facility is not applicable).

A nonresident individual receiving income from employment actually carried on in the Netherlands is subject to Dutch income tax. In certain situations involving multinational companies, the so-called 60-days rule applies. Under this rule, the Netherlands gives up its right to levy tax on employment income if the employee works in the Netherlands less than 60 days in any 12-month period. A nonresident who is employed by a Dutch public entity is also subject to Dutch income tax, even if the employment is carried on outside the Netherlands. A nonresident who is employed by a Dutch employer and is working in the Netherlands for part of the time may be liable to tax in the Netherlands on the full remuneration received from the employer. However, in this situation, tax treaties generally do not allow the Netherlands to tax income related to non-Dutch workdays.

Self-employment income. Annual profit derived from a business must be calculated in a consistent manner and in accordance with sound business practices. Annual profit is reduced by related business expenses, and taxable income is then determined by subtracting the deductions and the personal allowances described in Deductions and allowances.

A nonresident individual earning income from an enterprise car­ried on through either a permanent establishment or a permanent representative in the Netherlands is subject to Dutch income tax. Profits of a permanent establishment are calculated on the same basis as profits of resident taxpayers.

For the allocation of profit between a foreign head office and a Dutch permanent establishment, the permanent establishment is deemed, in principle, to be a separate entity dealing at arm’s length.

Directors’ fees. Directors’ fees are treated as ordinary employ­ment income.

An employee who is a 5% or greater shareholder is deemed to earn a salary of at least EUR44,000 a year. A lower amount may be taken into account for a shareholder who can prove that his or her actual salary at arm’s length is less than EUR44,000. However, if the tax authorities can prove that a salary at arm’s length would be higher than EUR44,000, the director’s salary must equal at least 75% (70%, up to and including 2014) of the salary at arm’s length and at least as much as the highest salary of other non-shareholder employees. These rules do not apply if the salary at arm’s length of the employee/shareholder does not exceed the amount of EUR5,000 a year.

A nonresident receiving income as a director of a company resi­dent in the Netherlands is subject to Dutch income tax. Tax trea­ties entered into by the Netherlands generally grant the right to tax this income in the resident country of the company that pays the directors’ fees. Exemptions are made, among others, in the tax treaties with Switzerland and the United Kingdom.

Approval of foreign pension schemes. Expatriates in the Netherlands often want to continue their foreign pension scheme during the period they work in the Netherlands. The main rule is that the employee contributions to the foreign pension scheme are not tax deductible in the Netherlands and the employer con­tributions are taxable. However, a “corresponding approval” can be requested from the Dutch tax authorities. When the approval is granted, the employee contributions to the pension scheme are tax deductible and the employer contributions will not be taxable, in general, in the same way as in the country of origin. To receive a corresponding approval, several conditions need to be fulfilled. The approval procedure makes a distinction between EU and non-EU pension schemes. The corresponding approval can be received for the period of employment in the Netherlands but no longer than five years.

Precautionary tax assessment. The Dutch tax authorities impose a precautionary tax assessment on pension entitlements when an individual emigrates and ceases to be tax resident in the Netherlands. The payment of this tax is suspended for a period of 10 years. If certain forbidden transactions take place (for example, receiving the pension in a lump-sum payment) during the 10-year period, the precautionary tax assessment is collected. Otherwise, the tax assessment lapses at the end of this period. The Dutch precautionary tax assessment has the potential to conflict with some tax treaties. In these situations, an appeal could be filed.

Income from a primary residence. The owner of a primary resi­dence is taxed on the deemed rental value of the residence which is determined based on the so-called “real estate valuation act,” which aims to reflect fair market value. For dwellings with a value exceeding EUR75,000, in general, a rate of 0.75% applies to calculate the deemed rental value. For dwellings with a value exceeding EUR1,050,000, a rate of 2.35% applies on the excess. The deemed rental value reflects the net income from real prop­erty, which is the deemed rental income less certain deductible expenses. For a period of up to 30 years, mortgage interest paid for the acquisition, maintenance or improvement of a primary residence is fully tax deductible from the deemed rental value and other Box 1 income. In general, the acquisition of a primary residence cannot be fully financed by a mortgage if a capital gain on the previous primary residence was realized. In principle, income from a second residence or rental income is taxed as Box 3 income. Restrictions are imposed on the deduction of mortgage interest. One of the restrictions is a prohibition on interest-only mortgages. Annual installments must be made within a maxi­mum of 30 years. Transitional rules apply to mortgages in exis­tence before 2013.

Effective from 1 January 2014, the rate in the top bracket (52%), against which mortgage interest is deductible, is lowered by 0.5% per year, until the effective rate amounts to 38%. For 2016, this rate is 50.5%.

Box 2 income. Box 2 income includes profits from a substantial shareholding, which is a shareholding of at least 5% of a certain class of shares of a company resident in or outside the Nether­lands. Both capital gains and regular income (dividends) are taxed. Tax is levied at a fixed rate of 25%.

Nonresidents are taxable on capital gains and regular income from a substantial interest of a company resident in the Netherlands.

Box 3 income. Box 3 income includes income from savings and investments. The taxpayer’s net value of savings and investments, including shares and bank accounts (excluding the value of loans with respect to a primary residence), on 1 January of the calendar year, is deemed to yield income at a rate of 4%. This income is taxed at a fixed rate of 30%, resulting in a tax burden of 1.2% of the net value. Specific exemptions apply for certain assets, including art and certain life insurance policies. A general exemption of EUR24,437 applies for each resident taxpayer.

Dutch resident taxpayers are taxed on their worldwide income, including income from savings accounts maintained outside the Netherlands. European Union (EU) member states in which sav­ings accounts are maintained must inform the EU member state where the beneficial owner of the savings account resides about the existence of this savings account. This notification is made annually. Consequently, the Dutch tax authorities are aware of savings accounts maintained outside the Netherlands, but within the EU.

Nonresidents are only taxable on the net value of real estate located in the Netherlands or on profit rights in an enterprise resi­dent in the Netherlands.

A dividend withholding tax is imposed on dividends paid by resident companies to resident or nonresident recipients. The withholding tax rate is 15%, unless reduced or eliminated by an applicable tax treaty. Resident individuals may credit domestic withholding tax against their total income tax due. A credit may be granted against Dutch income tax for foreign taxes paid on dividends and interest.

A 15% withholding tax is levied on dividends derived by non­residents, unless the rate is reduced by an applicable double tax treaty. Nonresident taxpayers cannot credit the Dutch dividend withholding tax against the final income tax payable. No further tax is imposed unless the shares constitute a substantial interest, in which case, income tax may be levied and dividend withhold­ing tax may be credited.

Interest and royalties derived by a nonresident are not subject to withholding tax. However, interest is included in taxable income if the recipient holds a substantial interest in the payer.

Taxation of employer-provided stock options. In general, stock options are taxed at the moment of exercise. The taxable gain arising at exercise is the fair market value of the shares on the exercise date less the exercise price.

Cross-border severance packages. The main rule in the guidelines of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention regarding the taxation of a cross-border severance package is that the severance payment is tax­able in the country where the employee worked in the 12 months before the termination of his or her employment contract. If an individual has worked in several countries, the allocation is made on a pro rata basis. The Netherlands explicitly conforms to the OECD guidelines.

Capital gains. Capital gains generally are exempt from tax. How­ever, exceptions apply at the applicable 2016 tax rates indicated in the following table.

Taxable gains                                                                        Rate

Capital gains realized on the disposal

of business assets (including real estate)

and on the disposal of other assets that

qualify as income from

independently performed activities                            Normal rates apply*

.
Capital gains on liquidation of

a company                                                                       Normal rates apply*

.
Capital gains derived from the sale of a

substantial interest in a company (that is,

5% of the issued share capital)                                                  25%

.

* For normal rates, see Rates.

Nonresidents are subject to income tax at normal rates on capital gains derived from the disposal of business assets and on capital gains derived from transfers of shares in a domestic corporation if the shares constitute a substantial interest.

Deductions and allowances

New Dutch wage tax regulation. Effective from 1 January 2015, a new Dutch wage tax regulation concerning allowances for busi­ness expenses (werkkostenregeling) is mandatory. The principle underlying this new system is that fewer rules apply with respect to tax-free allowances and employment benefits and that all allowances and benefits granted to employees by employers essentially constitute taxable wages. Specific exemptions are provided. The employer is entitled to a tax-free work-related costs budget of 1.2% (for 2016) of the total taxable wage bill. If the actual work-related costs exceed this budget, an employer’s final levy of 80% on the excess is due. This new regulation has a major impact on employer costs and on conditions of employ­ment. Readers should seek further information regarding these changes from a tax professional.

Deductible expenses and tax-free allowances. Under certain measures, taxpayers may claim the following deductions and allowances:

  • Deduction for mortgage interest for the acquisition, mainte­nance or improvement of the taxpayer’s primary residence.
  • Deduction for certain life insurance premiums that entitle indi­viduals to annuity payments. The amount depends on the avail­able pension rights of the individual.
  • Deduction for alimony payments.
  • Deduction for extraordinary expenses exceeding a certain thres­hold, including medical expenses, support provided to direct relatives and qualifying gifts.
  • A moving allowance, up to a maximum of EUR7,750, may be granted besides reimbursing for the actual cost to transport the goods. If the employer does not reimburse the employee for the moving costs, these amounts are not de ductible by the employee.
  • An allowance for business travel, including commuting expens­es, may be granted for private transportation, subject to certain limitations. Commuting expenses for public transportation may be reimbursed in full. Business travel and commuting expenses may not be deducted.

The deductions listed above for certain life insurance premiums, alimony payments, extraordinary expenses and gifts are not avail­able to nonresidents.

Under certain circumstances, a tax-free allow ance for extraterri­torial cost may also be available (see 30% facility) for qualifying expatriates.

30% facility. Expatriates in the Netherlands may qualify for a special tax facility, the 30% facility. This facility enables an em­ployer to pay an employee a tax-free allowance of up to a maxi­mum of 30% of present employment income and a tax-free reim­bursement of school fees for children attending international schools. On re quest, the employee may be considered a nonresi­dent taxpayer of the Netherlands for certain items of income (partial nonresident status). The maximum term for the 30% facility is limited to 96 months as of 1 January 2012. Transitional provisions have been made for people whose employment began before 1 January 2012. The period of 96 months is further reduced if the employee has worked or stayed in the Netherlands for a period of time in the past. Periods of tax liability in the Netherlands as a result of employment without physically being present is also deducted. An example is a director of a Dutch company who lives abroad.

To qualify for the 30% facility, certain conditions must be met, including the following:

  • The employee must be recruited or assigned from abroad to work in the Netherlands.
  • Dutch wage tax must be withheld.
  • In the employment contract (or in an addendum to the contract), the employer and employee must agree that a tax-free allow­ance for extraterritorial costs up to a maximum of 30% is included in the compensation package.
  • The employee must have highly skilled specific expertise that is “scarce or not available” in the Dutch labor market.
  • Before employment in the Netherlands, the foreign employee must be living farther than 150 kilometers from the Netherlands’ national border. Cross-border employees are excluded from the 30% facility.

The requirement that the employee from abroad has specific expertise is solely met with a standard taxable salary of more than EUR36,889 (excluding the 30% allowance). Foreign income may also be included in this salary level. An exception is made for certain groups of employees, such as graduates under the age of 30 holding a master’s degree, in which case the taxable salary must exceed EUR28,041. No salary standard applies to certain groups of academics and medical trainees at designated academic institu­tions. The salary standards will be indexed annually.

If an employee meets the income standard, he or she is deemed to hold specific expertise. In addition, the employee must con­tinue to meet the condition that the specific expertise is either scarce or not available in the Netherlands. The following factors are taken into account in this scarcity criterion:

  • The level of education attained by the employee
  • The employee’s experience relevant to the position
  • The remuneration standard of the position in question in the Netherlands relative to the remuneration level in the employee’s own country

Salary paid after the end of the month following the month in which the Dutch employment ends is excluded from the 30% facility.

The tax-free allowance is intended to cover all “extraterritorial costs.” As a result, no additional tax-exempt reimbursements of costs are allowed on top of the 30% tax-free allowance.

Instead of applying the 30% facility, reimbursement of the actual extraterritorial costs free of tax is allowed even if this amount is higher than 30% of the present employment income. Consequently, the employer must maintain records of all actual extraterritorial costs reimbursed free of tax.

Rates. The rates applicable to income from Box 1, effective from 1 January 2016, are set forth in the following table.

National

Taxable income Rate Insurance
premium
Total rate
Exceeding Not exceeding of tax A B A B
EUR EUR % % % % %
0 19,922 8.40 10.25 28.15 18.65 36.55
19,922 33,715 12.25 10.25 28.15 22.50 40.40
33,715 66,421 40.40 0.00 0.00 40.40 40.40
66,421 52.00 0.00 0.00 52.00 52.00

A These rates apply to persons who are entitled to a pension on the basis of the General Old Age Pensions Act (AOW). In 2016, this entitlement starts at the age of 65 years and six months. This age will rise in small steps until it reaches 67 in 2021.

B  These rates apply to persons not included in the category “A” above.

Income from Box 2 is subject to tax at a rate of 25%. Income from Box 3 is subject to tax at a rate of 30%.

Personal tax credits. Personal tax credits are fixed amounts that directly decrease the income tax payable.

The personal tax credits consist of an income-related general credit for every taxpayer (maximum EUR2,242; minimum EUR0), an income-related general employment credit for recipi­ents of income from profits and employment (maximum EUR3,103; minimum EUR0), a specific employment credit for employees who are between 62 and 64 years old (maximum EUR1,119), and other credits, such as for children, single parents and senior citizens. In general, the personal tax credits may not exceed tax payable plus National Insurance contributions, and, consequently, application of the credit cannot result in a refund.

Approximately 23% of the credits relates to income tax or wage

tax. The other 77% relates to National Insurance contributions due (see Section C).

The personal tax credit is limited if a taxpayer is not insured

under one or more of the following National Insurance schemes:

  • General Old Age Pension Act (AOW)
  • Surviving Dependents Act (ANW)
  • Exceptional Medical Expenses Act (WLZ)

This is particularly important for senior citizens who no longer have to pay AOW contributions.

Relief for losses. Individual taxpayers may carry losses related to Box 1 back for three years or forward for nine years. In general,

positive income of one box may not be offset by negative income of another box.

Other taxes

Net worth tax. The Netherlands does not impose net worth tax.

Inheritance and gift taxes. Inheritance tax and gift tax are levied on all property inherited from or donated by an individual who was a

resident or deemed to be a resident of the Netherlands at the time

of death or donation. Dutch individuals who emigrate from the Netherlands are deemed to be resident in the Netherlands for

10 years after emigration. A gift made by a former Dutch resident, regardless of nationality, who left the Netherlands less than one year before making the gift is subject to Dutch gift tax. Tax is levied on an heir or a gift recipient, regardless of his or her place of residence.

Inheritance and gift tax rates range from 10% to 40% of the value of a taxable estate or donation after deductions, depending on the applicable exemptions and the relationship of the recipient to the deceased or donor.

Inheritance tax exemptions. The most important exemptions from inheritance tax are the following:

  • Acquisition by the surviving spouse: a maximum exemption of EUR636,180
  • Acquisition by the children: a maximum exemption of EUR20,148
  • Acquisition by disabled children: a maximum exemption of EUR60,439
  • Acquisition by parents: a maximum exemption of EUR47,715
  • Generally, property acquired by an acknowledged charity
  • In other cases: EUR2,122

Gift tax exemptions. The most important exemptions from gift tax are the following:

  • Gifts from a parent to a child: a general one-off exemption of EUR5,304
  • A general one-off gift from the parents to a child aged 18 to 40: EUR25,449, which may be increased to EUR53,016 in the case of a gift issued for or applied to the acquisition of a primary residence or to the payment of the child’s education expenses
  • Other gifts: up to EUR2,122

Filing obligation and payment. The recipient of an inheritance or gift must file a tax return within eight months from the time of death. For gift tax, the return needs to be filed within two months after the calendar year in which the gift was made. The Revenue imposes a tax assessment stating the tax due after the tax return has been filed.

Nonresidents inheriting assets from an individual who was a resident or a deemed resident of the Netherlands at the time of death are subject to inheritance taxes. To provide relief from double taxation, the Netherlands has entered into inheritance tax treaties.

Inheritance tax treaties. The Netherlands has entered into inheri­tance tax treaties with Aruba, Austria, Curaçao, Finland, Israel, Sint Maarten, Sweden, Switzerland, the United Kingdom, and the United States. All treaties cover inheritance tax with respect to bequests. Only the treaties with Aruba, Austria, Curaçao, Sint Maarten and the United Kingdom also cover gift tax. If no tax treaty applies, Dutch unilateral law for the avoidance of double taxation applies, but, in practice, it does not always prevent dou­ble taxation completely.

Social security

Contributions. The Social Security Acts can be classified into three categories, which are National Insurance Acts, the Employee Insurance Acts and the Health Insurance Act. National Insurance Acts provide benefits to all Dutch residents. National Insurance contributions are payable on taxable income of up to EUR33,715 and are not deductible for tax purposes. The maximum annual National Insurance contribution payable by an employee is EUR9,490 (before taking into account the social security credit). Employee Insurance Acts provide additional benefits for wage earners. Employee Insurance contributions are EUR0 for the employee and fully paid by the employer with a maximum of EUR6,183 per employee. In addition, the employer must pay an income-related contribution for the Health Insurance of the employee with a maximum of EUR3,562 per employee, and the employee must pay an employee’s contribution of approximately EUR1,212.

The following table presents the contribution rates for 2016 under the National Insurance Acts.

.                                                                          Maximum            Maximum

National                     Percentage                         income            contribution

Insurance                          %                               EUR                    EUR

General Old Age

Pension (AOW)                   17.90                           33,715                   6,035
Survivor Benefits

.

(ANW)                                   0.60                            33,715                   202
Exceptional Medical

.

Expenses (WLZ)                    9.65                            33,715                  3,253

.
Credit (general and

employment credit;

minimum amount)                                                                                 _____*

.

Total maximum

contribution by

employee (not tax

deductible)                               28.15                                                        9,490

 

* The social security part of the amounts of these credits differ depending on the age and/or income of the individual. The maximum amount of the general credit is 77% of EUR2,242 and is reduced step by step from an income of EUR19,922 to EUR0. The maximum amount of the employment credit is 77% of EUR3,103 and is reduced step by step from an income of EUR34,015 to EUR0.

The following table presents the contribution rates for 2016 for employers under the Employee Insurance Acts.

Employee Insurance Percentage (%) Maximum Income (EUR) Maximum contribution (EUR)
Disability Insurance Act (WAO/WIA) basic contribution 5.88 52763 3102
Disability Insurance Act (WAO/WIA) differentiated contribution (average) 0.5 52763 591
Unemployment Insurance Act (WW) basic contribution 2.44 52763 1287
Unemployment Insurance Act (WW) sector fund (average) 1.78 52763 939

 

Maximum income Maximum contribution
Employee Insurance Percentage  
  % EUR EUR
Contribution child care 0.50 52,763 264
Total maximum contribution by employer 11.72 52,763 6,183

An employer must pay 70% of an employee’s salary for a two-year period if the employee cannot perform his or her duties because of illness. For this purpose, the maximum salary consid­ered is EUR52,763 per year. To cover its obligations under the act, an employer may obtain private insurance or establish a reserve.

Health Insurance. Every individual who is socially insured in the Netherlands must take out an individual Health Insurance policy. Every individual aged 18 and older pays a standard contribution averaging EUR1,212 for Health Insurance. Insurance claims up to EUR385 per year are for the own risk of the individual. Any insurance claims in excess of EUR385 are paid by the health insurer. In addition to the standard contribution, an income-related contribution is payable at a rate of 6.75% (for self-employed persons, a 5.50% rate applies), capped at an income of EUR52,763. The 6.75% income-related contribution for employ­ees is fully paid by their employers. This employers’ contribution is not considered taxable income to the employee. Resident individuals who are not socially insured in the Netherlands must register with a care insurer in the Netherlands to retain their right to medical care. The following table presents the contribution rates for Health Insurance.

Maximum income Maximum contribution
Health Insurance (ZVW)                                                                                                                                 Percentage (%) 
                                                                                                                                  EUR EUR
Employers’ contribution, income related 6.75 52,763 3,562
Employees’ standard contribution (average; differs among the various health insurance companies) 1,288
Employees’ liability for the first EUR385 385
Total maximum contribution 5,235

Totalization agreements. Nonresidents earning income from Dutch employment are, in principle, subject to Dutch National Insurance, Employee Insurance and Health Insurance contribu­tions. As a result, they may be subject to social security taxes both in their home country and in the Netherlands.

To provide relief from double social security contributions and to assure benefit coverage, the Netherlands has entered into agree­ments with several countries. As an EU member state, the Netherlands applies EU Regulation 883/04, which entered into force on 1 May 2010 and replaced EU Regulation 1408/71.

Regulation 1408/71 continues to apply for a maximum of 10 years to all cross-border situations existing before 1 May 2010 in which Regulation 883/04 alters the relevant state if the individual does not opt into coverage of the new regulation and if a material change in circumstances does not occur.

The Netherlands has also entered into social security agreements with the following non-EU jurisdictions.

Argentina                          Hong Kong SAR            Monaco

Australia                           India                                Montenegro

Belize                                Indonesia                         New Zealand

Bosnia and                        Isle of Man                      Panama

Herzegovina                     Israel (except for             Paraguay

Canada                              East Jerusalem,                Philippines

(including                         the Gaza Strip,                 Serbia

Quebec)                            Golan and the                  South Africa

Cape Verde                       West Bank)                     Suriname

Channel Islands                Japan                               Thailand

(Alderney, Guernsey,       Jordan                             Tunisia

Herm, Jersey                    Korea (South)                  Turkey

and Jethou)                       Kosovo                            Uruguay

Chile                                 Macedonia                       United

Ecuador                            Morocco (except             States

Egypt                                for Western Sahara)

An agreement has been concluded between the Netherlands and Pakistan on the verification of benefit entitlements. Under this agreement, all AOW pension payments to Pakistan are based on a maximum of 50% of the Dutch net minimum wage.

Tax filing and payment procedures

The tax year in the Netherlands is the calendar year. Income tax returns relating to a calendar year must be filed before 1 May of the following year, unless an extension is obtained. If the income tax return is filed before 1 April of the following year, the Dutch tax authorities respond before 1 July of that year.

Employers withhold tax and National Insurance premiums (com­bined) on wages from employees under the Pay-As-You-Earn (PAYE) system. For most people, the wage tax is not only an advance payment of income tax and National Insurance premi­ums, but it is also the final payment. Any additional income tax and National Insurance premiums due must normally be paid within two months after receipt of an assessment rather than when filing the tax return.

Married persons are taxed separately on employment and busi­ness income. Two “partners” (see definition of “partner” below) may elect for the following categories of income and deductions to be attributed to a particular partner:

  • Income from home ownership. If this income is negative because of the deduction of mortgage interest, it is advisable to attribute this income to the partner with the highest income.
  • Profits from a substantial shareholding.
  • Personal deductions.

Nonresidents may not make this election unless they are taxed as Dutch tax residents. As of 1 January 2015, foreign taxpayers who are resident in Bonaire, St. Eustatius and Saba (BES-Islands), the EU, the European Economic Area (EEA) or Switzerland are taxed as Dutch tax residents, provided that 90% or more of their income is subject to payroll or income tax in the Netherlands. For this purpose, an income declaration from the resident state needs to be obtained to measure the 90% criterion. If this income crite­rion is not met, treatment as a resident taxpayer is only possible for this group if the Netherlands is required to do so under European law or a relevant tax treaty.

The Income Tax Law includes the term “partner.” A “partner” is understood to mean the spouse or registered partner of a taxpay­er, provided he or she is not permanently separated. Unmarried adults who live together and are registered at the same address with the municipal authorities are treated as partners for tax pur­poses if one of the following circumstances exists:

  • A child was born from their relationship.
  • A child of one of the individuals was officially acknowledged by the other individual.
  • The individuals are stated as partners in a pension plan.
  • The individuals own a primary residence together.

Partner status for tax purposes provides the following advantages:

  • Eligibility for several business-related facilities (working part­ners’ deduction and transfer of a business or a part thereof without tax consequences).
  • The option of allocating to both partners at their discretion the yield assessment base for capital yield tax (Box 3), except for the year of immigration or emigration, and the joint elements of income. Joint elements of income include taxable income from home ownership, taxable income from a substantial business interest, exceptional expenses, and deductible gifts and donations.
  • An increase in the personal tax credit for a partner without in­come or with low income to the aggregate of the general credit, employment credit, and (supplementary) combination credit applying to this partner. As an exception to the general rule, in this case, the tax credit is refundable in part or in full. However, the payment may not exceed tax and National Insurance contri­butions payable by the other partner.

A nonresident taxpayer may not be a partner, unless he or she elects to be taxed as a resident of the Netherlands.

Inheritance tax returns normally must be filed within eight months after the date of death. Gift tax returns should be filed within two months after the date of donation.

Double tax relief and tax treaties

The Decree for the Avoidance of Double Taxation provides pro­portional relief from Dutch income tax on foreign-source Box 1 income taxed in the country of source and applies in the absence of an applicable tax treaty.

Most double tax treaties concluded by the Netherlands provide for double taxation relief, regardless of whether the income is subject to income tax abroad. The relief is usually calculated in accordance with the following simplified formula.

Foreign-source Box 1 income               Tax on_ Amount deducted

Worldwide Box 1 income x worldwide — from Dutch tax

income

The relief must be calculated separately for each box of income.

The Netherlands has entered into double tax treaties with the fol­lowing jurisdictions.

Albania                            Hungary                    Qatar

Argentina                        Iceland                      Romania

Armenia                          India                          Russian Federation

Aruba                              Indonesia                  Saudi Arabia

Australia                          Ireland                       Singapore

Austria                            Israel                         Sint Maarten

Azerbaijan                       Italy                           Slovak Republic

Bahrain                            Japan                         Slovenia

Bangladesh                      Jordan                       South Africa

Barbados                         Kazakhstan                Spain

Belarus                            Korea (South)           Sri Lanka

Belgium                           Kuwait                      Suriname

Bermuda                          Latvia                        Sweden

BES-Islands                    Lithuania                   Switzerland

Brazil                               Luxembourg             Taiwan

Bulgaria                           Macedonia                Thailand

Canada                            Malaysia                   Tunisia

China                               Malta                         Turkey

Croatia                             Mexico                      Uganda

Curaçao                           Moldova                   Ukraine

Czech Republic               Mongolia                  USSR (a)

Denmark                         Morocco                   United Arab

Egypt                               New Zealand             Emirates

Estonia                            Nigeria                      United Kingdom

Finland                            Norway                     United States

France                             Oman                        Uzbekistan

Georgia                           Pakistan                    Venezuela

Germany                         Panama                     Vietnam

Ghana                              Philippines                Yugoslavia (b)

Greece                             Poland                       Zambia

Hong Kong SAR            Portugal                    Zimbabwe

a) The Netherlands honors the former USSR tax treaty with respect to Kyrgyzstan, Tajikistan and Turkmenistan.

b) The Netherlands honors the former Yugoslavia treaty with respect to Bosnia and Herzegovina, Montenegro and Serbia.

Visas

Nationals of many foreign countries may not enter the Nether­lands unless they have valid passports and visas. Visas may be obtained from the Dutch embassy or consulate abroad.

Individuals coming to the Netherlands for a short term may stay for a maximum period of 90 days in any 180-day period if they have valid passports or other travel documents, as well as visas if required, and if they can prove that they have sufficient financial means to stay in, and to leave, the Netherlands. If these condi­tions are met, a residence permit (see Section G) is not required.

Residence permits

Foreign nationals wishing to stay in the Netherlands for a period of more than 90 days may obtain a residence permit under any of the following circumstances:

  • International agreements require the permitting of entry, for ex ample, to nationals of EU countries and to nationals of coun­tries participating in the EEA (the EEA countries are Iceland, Liechtenstein and Norway) and nationals of Switzerland.
  • The presence of the foreign national is in the national interest.
  • Permission is granted on humanitarian grounds.

Before the arrival of a foreign national wishing to stay in the Netherlands for a period of more than 90 days, an Admission and Residence (Toegang-en Verblijf, or TEV) application must be submitted. A fee must be paid for the processing of the applica­tion.

A legalized marriage certificate for the spouse and legalized birth certificates for the children are needed with respect to the TEV application for dependents. The legalization procedure depends on the country where the event took place. This proce­dure can be time-consuming and applicants should check the requirements at an early stage.

After approval of the TEV application, most nationals must visit the Dutch embassy or consulate in the country of origin or the country of permanent residence to obtain an entry visa (D-visa or MVV).

Nationals of the following countries do not need to obtain an entry visa from a Dutch embassy or consulate abroad before traveling to the Netherlands for a period exceeding 90 days.

EU member                     Canada                            New Zealand

countries                          Japan                               Switzerland

EEA countries                 Korea (South)                  Vatican City

Australia                          Monaco                           United States

After arriving in the Netherlands, a foreign national must visit the Immigration and Naturalisation Service (Immigratie- en Naturalisatiedienst, or IND) to collect the residence permit in the Netherlands.

Foreign nationals who want to live in the Netherlands must sat­isfy all of the following conditions before they are issued resi­dence permits:

  • They must have sufficient means of financial support.
  • They must not represent a threat to public order or national security.
  • They must have already found work for which a work permit has been, or will be, issued. However, employers of European (EU, EEA and Switzerland) and Japanese employees are not required to obtain work permits. Transitional rules apply to employees from Croatia until 1 July 2018 with the possibility of extension.

EU, EEA and Swiss nationals do not need residence permits to stay in the Netherlands.

If a foreign national has held a residence permit for five consec­utive years, he or she may apply for a permanent residence per­mit. For permanent residence permit applications, integration courses must be completed.

Work permits and self-employment

In principle, all non-European nationals (nationals from coun­tries other than EU countries, EEA countries and Switzerland) who wish to be employed in the Netherlands need Dutch work permits. An exception applies to Japanese nationals. The existing law in the Netherlands seeks to limit the possibilities of Dutch employers’ hiring non-European personnel.

Employers who want to hire foreign nationals must obtain work permits from the UWV WERKbedrijf (public employment ser­vice) before the start of the employment. If a work permit is not requested, the employer is subject to a fine of EUR8,000 per illegal foreign national.

Croatia became an EU member state on 1 July 2013. Transitional rules apply to employees who are Croatian nationals. During the transitional period (until 1 July 2018 with the possibility of extension), Croatian nationals continue to need a work permit for the first 12 months of performing labor in the Netherlands.

Grounds for refusal. A work permit is not granted if one of the following compulsory grounds for refusal is met:

  • A suitable unemployed person with greater priority is located. Top priority is given to qualified unemployed Dutch people and to qualified unemployed individuals in European countries.
  • The vacancy has not been registered with the UWV WERKbedrijf for at least five weeks before the work permit request.
  • The employer does not make enough of an effort to find labor within the European labor market.
  • A residence permit has not been requested or was not granted.
  • The conditions of employment are substandard compared to those of other employees in the same position, and consequent­ly, no one from the European labor market is available to work under such conditions.
  • The employer does not pay at least the minimum monthly wage for an adult.
  • A foreign national performing the labor is not in the best inter­est of the Netherlands.
  • A quota applies for the number of work permits to be granted for the activities performed, and this quota has been reached for the specific period.

Certain exceptions to the above compulsory grounds can be made for specific situations, such as the transfer of an employee within an international group of companies. For these positions, suitable unemployed individuals with greater priority do not need to be sought in the European labor mar­ket. To qualify for this intracompany transfer exception, the following conditions must be satisfied:

  • The employee must have been employed by the group before his or her transfer to the Netherlands.
  • The employee must be in the possession of a bachelor’s or mas­ter’s degree.
  • The employee must earn a monthly gross salary of at least EUR4,240 (excluding holiday allowance) for 2016. This figure is linked to the minimum salary requirement for a highly skilled migrant (see Highly skilled migrants).
  • The employee must be appointed to a key position in a Dutch company.
  • The worldwide turnover of the group must be at least EUR50 million per year.

Other exceptions include, but are not limited to, highly skilled migrants (see Highly skilled migrants) who will bring their spe­cific expertise to the Netherlands and cross-border workers with a valid residence permit from another EU country.

The work permit application may also be denied on other grounds in addition to the compulsory refusal grounds. These additional refusal grounds include, but are not limited to, the fol­lowing:

  • It is expected that in the foreseeable future suitable unemployed persons with greater priority will be available.
  • The foreign national is younger than 18 years of age.
  • No suitable accommodation is available for the employee.

Work permits are not required in certain specific situations, including, but not limited to, the following:

  • The foreign national (and his or her partner) has a residence permit for a highly skilled migrant (see Highly skilled migrants).
  • The employee has his or her permanent residence outside the Netherlands and the employee works only occasionally (for a maximum period of 12 weeks in 36 weeks) in the Netherlands. The employee’s employment in the Netherlands must involve installing or repairing machinery delivered by an employer lo­cated outside the Netherlands, and installing and amending software, including providing or operating the machinery and software.
  • The employee works for no longer than 13 weeks in a period of 52 weeks in the Netherlands for the purpose of attending busi­ness meetings or entering into agreements.

Period of validity. After the conditions for the issuance of a work permit are met, the permit may be issued for different time peri­ods. If a work permit is granted after a labor market test, a work permit is issued for one year only. To receive another work per­mit, a labor market test should be redone near the end of that year. A work permit based on a transfer within an international group of companies can be granted for maximum of three years. After a five-year period, an employee may qualify for an endorsement on his or her residence permit, stating that he or she is allowed to perform labor and is no longer required to have a work permit.

Population Registrar. Each individual who stays in the Netherlands for more than four months in a six-month period must report his or her home address in the Netherlands to the Population Registrar in the town where he or she is residing. An original and translated legalized birth certificate, an original legalized and translated marriage certificate (if applicable) and a rental con­tract for accommodation are required.

If an individual stays in the Netherlands for less than four months in a six-month period, registration is done at the office for short-term registration (RNI office).

Self-employment. A self-employed person does not need a work permit. However, if a self-employed foreign national applies for a residence permit, the IND asks the Ministry of Economic Affairs whether the self-employed person is allowed to work in the Netherlands.

Highly skilled migrants. To attract highly skilled foreign employ­ees to the Netherlands, a special procedure exists for so-called highly skilled migrants. Employers must be accredited sponsors to use the highly skilled migrant procedure. Accredited sponsors must fulfill certain obligations throughout the period in which the employee is in the Netherlands, and maintain full administra­tion regarding the employee for the five years after the end of employment of the individual. Employers can apply to the IND for the status of accredited sponsor. The application fee is EUR5,183 (2016 amount). The status of accredited sponsor is granted for an unlimited time period.

An employer is not required to apply for a work permit on behalf of the highly skilled migrants. The employer needs only to apply to the IND for a residence permit on behalf of the employee. For 2016, an employee must earn a gross monthly salary of EUR4,240 (excluding holiday allowance) or more to qualify for a residence permit as a highly skilled migrant. Employees under 30 years of age must earn a gross monthly salary of EUR3,108 (excluding holiday allowance) or more to apply. The salary levels are adjusted annually.

A special salary requirement applies to highly skilled migrants after an orientation year for highly educated persons (see Orientation year for highly educated persons). A monthly gross salary of at least EUR2,228 (excluding holiday allowance; 2016 amount) applies for these highly skilled migrants.

Salary payments must be made through bank transfers to a bank account in the name of the employee on a monthly basis.

The IND commits itself to grant the residence permit (TEV approval, if applicable) within two weeks. The residence permit is granted for a maximum period of five years under the restric­tion “highly skilled migrant” and can be renewed.

Football players, spiritual leaders, clerics and individuals perform­ing activities in a sexually related business are excluded from the highly skilled migrant category.

Orientation year for highly educated persons. Students who obtained a bachelor’s or master’s degree in the Netherlands or who have graduated from a top university abroad can apply for a Residence Permit Orientation Year for Highly Educated Persons. In addition, scientific researchers may apply for this residence permit.

This type of residence permit can be obtained within three years after completing the studies or after obtaining the PhD. This residence permit is valid for a maximum of one year. The student may work during this year without a separate work permit.

EU Blue Card. The EU Blue Card is intended for employees who perform highly qualified labor within the EU. The EU Blue Card is issued by a certain member state and only gives the right to stay and work in this specific member state. To qualify for the EU Blue Card in the Netherlands, employees must satisfy the month­ly gross salary requirement of EUR4,968 (excluding holiday allowance; 2016 amount) or more and must have a diploma showing that the employee has completed a higher education degree program with a duration of at least three years. A foreign higher education diploma must be evaluated. The employee must have an employment contract for a highly qualified position for at least one year.

Family and personal considerations

Family members. Dutch law provides for the unification of fami­lies. For individuals who plan to bring their spouses and children under 18 years of age to the Netherlands, proof of sufficient means of subsistence and acceptable accommodation is neces­sary. Depending on the type of permit for the main application, the partner’s requirements to work in the Netherlands need to be verified. The partner of a highly skilled migrant may work in the Netherlands without a work permit. As a result, the partner of a highly skilled migrant is only required to hold a residence permit.

Marital property regime. The default marital property regime in the Netherlands is one of community property. Various alternatives are possible and must be notarized. Changing the marital prop­erty regime after the marriage is solemnized is more expensive and requires court approval to ensure that creditors are not affected by the change.

The community property law applies to heterosexual and homo­sexual married couples. Other couples who are not married may form a “registered partnership,” but the consequences are less extensive than for married couples (for example, with respect to heirship). If the marital property regime of expatriates working in the Netherlands becomes relevant, the tax authorities respect the regime or the arrangements in the country where they were mar­ried.

In addition to potential gift and inheritance tax consequences, community property law may also affect an individual’s personal income tax liability. This is generally the case only for nonresi­dents who have Dutch-source income taxable in the Netherlands, for example, income from Dutch real estate. If married, this income is allocated between the spouses based on the applicable marital property regime. Under community property, the allocation is 50% to each spouse. If a loss is incurred, it may be carried back or carried forward. If one spouse has no positive income to offset the loss, the carryover does not result in a tax benefit. Therefore, under certain circumstances, Dutch expatri­ates working abroad may prefer to change their marital property regime. For tax residents, no personal income tax consequences result from the marital property regime.

Forced heirship rules. Parents may disinherit their children. How­ever, a child may always claim his or her legal portion of the estate.

Driver’s permits. In certain cases, a driver’s license obtained out­side the Netherlands can be exchanged for a Dutch driver’s license. However, this is only possible if all of the following conditions are satisfied:

  • The individual is a Dutch resident.
  • His or her foreign driver’s license is still valid.
  • He or she has a valid Dutch residence status or permit.

For driver’s licenses issued outside the EU, the following two additional requirements must be fulfilled before an exchange is possible:

  • The driver’s license must have been issued in a year in which the individual was resident in the issuing country for at least 185 days.
  • The individual must meet the age limit set by Dutch law regard­ing the different categories.

An exception exists regarding the validity of a foreign driver’s license. It is possible to exchange an expired European driver’s license. However, to exchange it, the individual needs a statement from the issuing authority in which it declares that it does not object to exchanging this expired driver’s license for a Dutch driver’s license.

Valid driver’s licenses issued in the following jurisdictions can be exchanged.

Andorra*                     Iceland                             Portugal

Aruba                           Ireland                             (Azores

Austria                         Isle of Man                      and Madeira)

Belgium                       Israel*                             Québec

BES-Islands                 Italy                                 (province

Croatia                         Japan*                             of Canada)*

Curaçao                        Jersey                              Romania

Cyprus                         Korea                               Singapore*

Czech                           (South)*                          Sint Maarten

Republic                    Latvia                              Slovak Republic

Denmark                      Liechtenstein                   Slovenia

Estonia                         Lithuania                         Spain (Canary

Finland                         Luxembourg                    Islands)

France                          Malta                               Sweden

Germany                      Monaco                           Switzerland

Greece                          Norway                           Taiwan*

Hungary                       Poland                             United Kingdom

* For these jurisdictions, a (valid) foreign driver’s license can be exchanged only for a Dutch driver’s license if the foreign driver’s license is valid in a specific category.

It is not possible to exchange an international or European driv­er’s license for a Dutch driver’s license. Only the original driver’s license issued by the proper authorities from the country of issue can be exchanged. Every driver’s license is checked for validity and authenticity. This means that the person may have to prove its soundness by asking the embassy or the consulate of the country where the license was issued for a confirmation for the Dutch authorities. The person may also be requested to have his or her driver’s license translated by an attested translator.

Exam to retake the driving test. If the above-mentioned condi­tions are not met or if the 30% tax facility (see Special rule for driver’s license procedure in case of the 30% facility) applies, the individual must take the regular theory and practical test. The exam is administered by the Central Office for Motor Vehicle Driver Testing (CBR).

Special rule for driver’s license procedure in case of the 30% facility. An individual who benefits from the 30% facility and his or her family members can directly apply for a Dutch license at the local Dutch municipal office without taking a driving test. To exchange the foreign driver’s license for a Dutch driver’s license, the individual must go to the local Dutch municipal office. He or she must pay a fee (the amount varies) for the license and submit the following:

  • A copy of the statement issued by the International Tax Office in Heerlen proving that the individuals or another member of his or her family is entitled to benefit from the 30% facility.
  • The individual’s original, valid foreign driver’s license, issued in a country where he or she has been a resident for longer than a period of 185 days (the individual must hand in the license).
  • An extract from the municipal register, proving that the indi­vidual is registered and stating his or her address in the Netherlands.
  • A Certificate of Capability, which is a questionnaire available at the local government office. To obtain a Dutch driver’s license, the individual must fill out a personal declaration, which is required by the CBR. A medical team reviews this declaration and decides whether the individual gets the driver’s license.
  • Two identical, recent passport photographs (taken from the front).
  • Under certain circumstances, a translation of the individual’s driver’s license by an attested translator (for example, if written in Chinese characters or in Cyrillic writing).