Paying Income Taxes in the Netherlands

Corporate income tax and income tax are different by the character of those paying this tax. While the former tax is the legal responsibility of corporations (as the name itself indicates), the latter concerns natural persons (individuals). Subsequently, income taxes in the Netherlands are Dutch taxes deducted from the income of the individuals.

Who is liable to Dutch taxes on income? Basically, both residents in the Netherlands and non-residents who obtain an income from the Netherlands are answerable to Dutch taxes on the earned income. Should non-residents opt for being treated as residents, then the same rules apply to them as in the case of residents. What does that mean? While non-residents liable to Dutch taxes are only taxed on income strictly related to the Netherlands (therefore on earnings obtained from the Netherlands), resident taxpayers are taxable on their full, whole earnings, no matter where they come from. Also, the earnings liable to belasting (tax) are separated into three classes and another important remark is that social security contributions are also chargeable from the individual's income.

The three classes on income liable to belasting concern the activities from which earnings are acquired. These classes are, as a rule, registered under the label of "boxes". Thus, the first box considers the income chargeable by the Belastingdienst (the tax administration office in the Netherlands) resulted from work and dwellings. Here, Dutch taxes are subtracted from wages, from allowances, from the profits gained in various businesses, from dwellings inhabited by owners, from the income obtained from freelance activities, from press and book distribution and copyright, therefore basically on all income gained, even on the percentages on retirement stipends.

To what concerns the distribution of Dutch taxes rates on the first box, they are of 34.15% for the first - 17,046, out of which the greatest percentage (31.70%) is held by social security contributions; then they increase at 41.45% in the case of the following -13,585, out of which, once again, social security holds the same percentage; then at 42% for the following -21,597, where social security contributions are no longer registered, tax is the single issue here; and finally, for whatever exceeds the last threshold, the belasting percentage reaches the point of 52%.

The second class of income taxable in the Netherlands results from the so called substantial interest in a company; in the case where an individual retains at least 5% of the company's shares and the company distributes to the individual shareholder profit-sharing documentation which is considered as the individual's substantial interest. This substantial interest is liable to Dutch taxes. The belasting rates for income from substantial interest are fixed at 25%.

Finally, the third class (box) of income liable to Dutch taxes is that coming from savings and investments. The taxes here concern income coming from: stipend indemnities for which the cost is not deductible; consumer credits; a lease house or a second home; savings, of course; investments. Stipend indemnities which are deductible belong to the first class of income chargeable by Dutch taxes, and the same goes for houses inhabited by owners. The tax rate for income obtained from savings and investments is fixed at 30%.

The same as it happens with corporate income, individual taxpayers have to file their income tax return with the Belastingdienst; they do have to move faster than corporate entities, since they have to file their tax return by the beginning of the second trimester of the year succeeding to the related financial year.

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