The Dutch taxation system implies a series of levies on various types of incomes for private persons irrespective of their nationality. This means that foreign citizens living here must also pay the same taxes. However, the same system provides for very advantageous incentives granted by the Dutch government under the form of deductions and allowances. One of these levies is the wealth tax in the Netherlands.
The Dutch wealth tax is imposed on assets held by local and foreign citizens living here. Below, our accountants in the Netherlands explain how this tax is imposed.
What does the Dutch wealth tax imply?
In order to pay the wealth tax in the Netherlands, a person must file tax returns with the local tax office in their hometown or city. Based on these returns, the amount of money due will be calculated and imposed on the taxpayer.
The Netherlands relies on the Box system when it comes to the taxation of individuals. The system covers 3 types of incomes, each one of them associated with a specific source. For the computation of the wealth tax, Box 3 must be completed with information.
Here are the categories of income considered for the wealth tax in the Netherlands:
- real estate property ownership;
- savings;
- investments.
The taxation of such income covers Dutch citizens, residents, as well as non-residents who live here on a temporary basis and who meet certain requirements.
Our accounting firm in the Netherlands is at your service if you have any questions on the Box system and on how foreign citizens are taxed here. We are also at your disposal with various accounting services for your company.
Dutch wealth tax rates
The taxation of individuals in the Netherlands is progressive and the levies are subject to minor changes in their rates every year. With respect to the wealth tax, the following rates apply:
- the first 30,360 euros are not taxed under the Box 3;
- a rate of 0.58% is imposed on an annual income raging between 30,361 and 102,010 euros;
- a rate of 1.34% is levied on income ranging between 102,011 and 1,020,096 euros;
- a rate of 1,68% will be imposed on amounts exceeding 1,020,096 euros.
The wealth tax in the Netherlands is calculated based on the value of the assets declared in Box 3.
The wealth levy is linked to the capital gains tax in the Netherlands, which is why if the first one is paid, the second no longer applies on investment income. From a capital gains tax point of view, the Dutch system is more advantageous compared to those of other countries, as substantial deductions and reductions are available for foreign citizens under the Netherlands’ double tax treaties.
As mentioned above, the wealth tax is also levied on real estate ownership, however, the property must be located in the Netherlands to be considered for taxation.
If you have any questions about the taxation system of this country, our Dutch accountants are at your disposal with detailed information if you are planning on relocating here.
Foreign citizens and the wealth tax in the Netherlands
Foreign citizens can be taxed as residents or non-residents in the Netherlands, no matter the type of income they obtain here. This also applies to the wealth tax which is imposed on the worldwide income if they reside here, or on the income they generate in this country only if they are here on a temporary basis.
Non-resident citizens will be deemed for taxation based on their connection to the country and the assets they own here. If these choose to become Dutch residents, property ownership, participation in local companies under the form of share ownership and savings held in Dutch bank accounts will be considered for the payment of the wealth tax.
If you need assistance in filing your tax returns with the Dutch tax authorities, our accountants are at your service.
Amendments to the wealth tax regime in the Netherlands
At the end of 2020, the Dutch government implemented a series of changes to its taxation system, and one of them covers the imposition of the wealth tax.
According to the amendments, several categories of individuals will benefit from tax deductions for the financial year of 2021. Savings, which are considered for the wealth tax in the Netherlands, will be exempt from taxes on the first 50,000 euros, while income falling into the same category and not exceeding 220,000 euros will be taxed at lower rates.
Young persons aged 18 to 35 and becoming first-time homeowners will not pay the property transfer tax, while for those above the age of 35, the rate of this tax has been lowered to 2%.
If you need more information on the Dutch wealth tax, please contact our accounting firm.