Expats and their Taxes

tax season

Tax season is here. Many people consider The Netherlands one of those high tax northern European countries.  It is! On the flip side, you can see where it all goes. Things work very smoothly and the public services are excellent. The hospitals are modern and efficient. The transport gets a bad press but is much better than any of the other countries where I have previously lived. The schools are excellent. The streets are clean. The list goes on! These countries of northern Europe also all feature very high up in the yearly lists of the happiest people in the world. The correlation is clear: high tax –  high spend is the best way. However, everyone would like to pay less tax. So here is an article about expats and their taxes. Lots of useful insights from Vincent, an expert in the field1 

Tax in The Netherlands

Blue letters. You haven’t had any post for a while? Well, here come the dreaded envelopes from the Belastingdienst. Tax is confusing even if it is in your own language, but in a foreign language, it is daunting. Where do you start? What can you include? What can’t you include? Most importantly, how do you avoid paying too much? And if you have a house, kids, investment income, etc, etc, then it can really get confusing and complicated. Are you getting all the refunds you legally can? 

We recently met with Vincent from Expat Taxes in order to get more insights for expats looking to achieve greater clarity with their tax situation. Vincent kindly took time out of his busy schedule to answer our questions.Expat taxes

 

Q1. The famous 30% ruling. It has changed over time. Can trailing spouses and partners use that to open a business?

The 30% ruling does not have any relevance for opening up a business. Anyone is able to open a simple business by registering the business with the KvK or Dutch Chamber of Commerce. The 30% ruling is only applicable on salary income and not on business income. However, it is possible to apply for the 30% ruling as a self-employed individual with a limited liability company (BV) as the company (BV) is required to pay a salary to its sole shareholder provided the shareholder works for the BV.

 

 

Expat taxes

 

Q2. Mortgages. Lots of ex-pats have bought houses in Amsterdam in recent years. There is interest relief.  What other house-related tax issues do expats need to know about?

Partners who are married, have opted for a registered partnership, have a child or jointly own property may elect the partial non-resident taxpayer status in the Dutch income tax return. When electing the non-resident taxpayer status the partners are only taxable on Dutch property which is not their primary property i.e. holiday homes. No taxation occurs on worldwide bank accounts, international property and portfolio investments.

30% ruling.

If the 30% ruling expires, the worldwide savings and investments will be taxable in box 3 (income from savings and investments). We establish income from savings and investments using a deemed of return on the value of your savings and investments – liabilities on 1 January of each calendar year. The income from the deemed rate of return is taxed at a rate of 30%. As a deemed of return is used, income from savings and investments such as dividends, interest, rents and other income is not taxable in The Netherlands. The deemed rate of return is between 1,79% and 5,28% depending on the total value of the taxable assets.

Mortgage interest and mortgage costs related to obtaining the mortgage such as notary costs, costs of mortgage advice, translator costs and valuation costs are tax-deductible. If you purchase a house you pay a 2% transfer tax on the purchasing price. 

2021

As of 1 January 2021 an exemption of transfer tax exists for buyers below the age of 35 provided the buyer has not used the exemption before and the property will be used as a primary residence.  As of 1 April 2021 another condition must be satisfied as the property price must be below € 400.000,- as well in order for the exemption to apply. Properties bought for investment purposes have an 8% transfer tax.

 
 
 

Q3 Could you please outline the credits and refunds that might be possible for families of which expats might not be aware?

There are several tax facilities available for families. The spouse with the lowest income may opt to elect the combined tax credit of € 2.815,- in the income tax return provided the conditions are satisfied. For example, the child is younger than 12 years old on 1 January and the child is registered at the residency address for at least 6 months;

Both parents must work (employed or self-employed) and the spouse who applies for the combined tax credit must have the lowest income (minimum income of  € 5.153,-)

Other tax facilities actually relate to benefits. A couple may apply for child care benefits (Kinderopvangtoeslag) which is a subsidy for costs of child care for couples who are both in employment.  By law, couples can have child benefit for each child from the government as well.

 
 
 
Expat taxes
 

Q4. What other benefits are there for couples?

 
1) double the tax exemption (€ 50.000 per person) for savings and investments of € 100.000;
 
2) it is possible to transfer deductions between couples allowing all deductions to be on the person with the highest taxable income;
 

3) electing the partial non -resident taxpayer status if one spouse or partner has been granted the 30% ruling. The savings and investments of the spouse will be taxed as a non-resident as well. In addition, the election of the partial non-resident taxpayer status applies to income from a substantial interest (income from ownership (>5% or more) of a limited liability company (BV or foreign equivalent). Therefore, income (dividends and capital gains) from a limited liability company that has its tax residency outside The Netherlands is tax-exempt in The Netherlands provided the election is made in the Dutch income tax return.

 
 
 
expat taxes
 

Q5. Finally, Vincent, what other important considerations do people need to think about and in which ways do Expat Taxes help people?

 
I think it is important to note that if taxpayers who have the 30% ruling and want to obtain a mortgage. They must be sure that the mortgage advisor is aware of how the 30% ruling works.  The 30% ruling lowers your taxable salary, but not your gross salary resulting in a higher net amount payable.
 
In addition to the above, we have the following suggestions:
 
– filing a return in the year of immigration or emigration usually results in a refund;
– it is possible to request an extension for filing the return by calling the authorities. Preparing a return by a tax accounting firm such as ExpatTaxes an extension is possible for up to a year.
– it very simple to start your own company in The Netherland by registering your company with the KvK.  Or do it online using a form.
 
Last but not least ExpatTaxes is able to file your personal and business tax returns and we provide (international tax consultancy). We also prepare financial statements for DAFT applications and help with troubles and payment issues with the tax authorities.

 

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So there you have it. It is a subject we have to think about. It is best to leave that in the hands of experts.

Vincent, thanks for your time and insights into expats and their taxes. Here are the contact details for Expat Taxes

 

Expat taxes

 

Expat Taxes

Address : Lijndenstraat 24-H, 1018 NV, Amsterdam

Expat Taxes website

Email : info@expattaxes.nl

Phone : 0418 54 10 58

 

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