Dutch Income Tax

Residents are liable for income tax in the Netherlands on their worldwide income; non-residents are liable on their Dutch-source income only. Residence is not determined by tax law, but according to the circumstances. The following circumstances are considered important: the availability of a permanent home, the place where the spouse and the children live and the centre of personal and economic relations. 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, and Box 3 includes income from savings and investments. Taxpayers may deduct the following from Box 1 income: mortgage interest for primary residence, premiums for certain life insurances, alimony payments, extraordinary medical expenses, support for direct relatives and gifts if certain thresholds are exceeded and a moving allowance under certain conditions. There are several tax credits: a general tax credit of EUR 2’074 (2008) is available for all taxpayers under the age of 65; all employees can claim an employment tax credit of EUR 1’443 (2008), furthermore, there are other tax credits such as for children, single parents and senior citizens. The tax rates for 2008 for income of Box 1 are: 33.60% on income up to EUR 17’579, 41.85% on EUR 17’579 to EUR 31’589, 42% on EUR 31’589 to EUR 53’860 and 52% on income over EUR 53’860. The rates for the first two brackets include national social security premiums. The tax year in the Netherlands is the calendar year. Income tax returns have to be filed before 1 April of the following year, although extensions can be applied for. Employers have to withhold taxes on salaries under a PAYE system as an advance payment of income tax. If an individual has no other income than the salary the taxes withheld by the employer will often be his final taxes. Married persons and partners are taxed separately.