Netherlands (Holland) - Tax Guide for Freelance Contractors

Tax residents in the Netherlands:         are liable for income tax in the Netherlands on their worldwide income;  
Non tax residents in the Netherlands:  are liable on their Dutch-source income only.  

Residence is determined not by law but according to the following circumstances:

•  the availability of a permanent home,
•  the place where the spouse and the children live and,
•  the centre of personal and economic relations.

A couple (married or unmarried) living together for the majority of the year may file a joint return.

Taxable income:

Income tax is levied on three categories (boxes) of income:

• Box 1:  includes employment income, business profits and income from home ownership
• Box 2:  includes income from a substantial shareholding taxed at 25%
• Box 3:  includes income from savings and investments taxed at 30%

Certain deductions are permissible from Box 1 income for 2011 including:

• costs for commuting by public transport
• extra-territorial costs for foregin employees including double housing, language courses, costs related to residence permits, exchanging driver's licenses, home leave, etc.
• alimony payments
• extraordinary medical expenses
• support for direct relatives
• life course scheme contributions
• other tax credits for children, single parents and senior citizens are also available

If certain conditions are met, a foreign employee working in the Netherlands may be granted the so-called 30% ruling.  Under this ruling a tax free reimbursement amounting to 30% of the income from active employement can be paid to the employee

• Tax rates for Box 1 income for 2011:
• 33% on income up to EUR 18’628
• 41.95% from EUR 18’628 up to EUR 33’436
• 42.00% from EUR 33’436 up to EUR 55’694
• 52.00% on income over EUR 55’694

  The rates for the first two brackets include national social security premiums.