Understanding taxes is challenging; even more so when everything is in a different language. Many people dread tax season as it can be complex and you often do not know where to start.
To help prevent surprises from the Dutch tax authorities, such as a fine due to unclaimed or unpaid taxes, we have written this article to help you gain a better understanding of how the Dutch tax system works.
Before we explore the various taxes you are likely to encounter as an expat in the Netherlands, let us begin with the basics: who is responsible for collecting taxes?
1. What is the belastingdienst?
The belastingdienst is the Dutch tax authority responsible for levying and collecting taxes, as well as administering various allowances and benefits for residents of the Netherlands.
The Dutch tax year runs from 1 January to 31 December. In most cases, the belastingdienst will send you a letter at the beginning of each year, informing you that you are required to file your annual income tax online no later than the 1st of May. Note that you will need a DigiD, which is a secure login for Dutch government websites, to file your taxes online.
If you file your tax return before receiving a letter from the belastingdienst, you may receive an email confirmation after submission, or no additional notice.
Now that you know who will be contacting you every year, let us look at whether you are obligated to pay taxes in the Netherlands.
2. Am I obligated to pay tax in the Netherlands?
Whether you are required to pay taxes depends on whether you live and earn an income in the Netherlands. There are two primary categories of taxpayers in the Netherlands:
2.1. Resident taxpayers
You will be considered a resident taxpayer if you have a lasting personal connection to the Netherlands, for example if you live and work here permanently. As a resident taxpayer, you are taxed on your worldwide income.
2.2. Non-resident taxpayers
You are a non-resident taxpayer if you do not live in the Netherlands but earn an income from Dutch sources. In this case, the Belastingdienst may tax you only on your Dutch-sourced income.
Until 31 December 2024, there was a third category of taxpayers in the Netherlands known as the partial non-resident taxpayer. This status was primarily available to expats benefitting from the 30% ruling. Individuals with this status were taxed as residents for box 1 income (such as employment income), while the non-resident tax rules applied to income in box 2 and box 3 (such as substantial interest, savings, and investments).
However, as of 1 January 2025, this provision has been abolished. This means that expats are no longer classified as partial non-resident taxpayers for box 2 and box 3 income.
3. Type of taxes in the Netherlands
Now that you know whether you are considered a resident or non-resident taxpayer, let us look at the types of the taxes you are likely to encounter while living and working in the Netherlands.
3.1. Inkomstenbelasting (income tax)
All individuals earning an income in the Netherlands are required to pay income tax. Resident taxpayers pay tax on their worldwide income, while non-resident taxpayers pay tax only on income earned in the Netherlands.
The Dutch income tax system is divided into three categories, referred to as “boxes”. Each box is taxed differently and has its own separate tax rules. Box 1 covers income from work and home ownership, while Box 2 pertains to profit received from a substantial interest in a company. Box 3 relates to savings and investments.
To determine your specific tax obligations, we recommend consulting one of our tax lawyers for personalised advice.
3.2. Social security contributions
If you live and work in the Netherlands, you are generally required to contribute to two types of social insurance. The first is volksverzekeringen (national insurance), which funds state pensions, survivor benefits, and care for the elderly and people with disabilities. The second is werknemersverzekeringen (employee insurance), which provides financial support in cases of illness, chronic illness, unemployment, or incapacity to work.
These contributions are typically withheld directly from your salary by your employer, and the amount you contribute depends on your earnings.
If you are unsure whether your payslip deductions are correct, contact one of our labour lawyers who can assist you with the calculations.
3.3. Overdrachtsbelasting (property transfer tax)
If you purchase a property in the Netherlands, you will generally pay 2% transfer tax on the purchase price. However, if you are between the ages of 18 and 35 at the time of signing the notarial deed, it is your first home in the Netherlands, and it will be your primary residence, you may be exempt from paying the transfer tax, provided the property’s value does not exceed €525,000.
If you are considering buying a house, we encourage you to read our full article on Buying a House in the Netherlands as an Expat, where we explain the process in detail and guide you on where to start.
3.4. Motorrijtuigenbelasting (motor vehicle tax)
If you own a car or other motor vehicle in the Netherlands, you are required to pay motor vehicle tax. Once your vehicle is registered, the belastingdienst will send you periodic tax invoices. You can choose to pay this tax either monthly via debit order or every three months, following the receipt of an invoice from the belastingdienst.
The amount of tax you will be required to pay depends on several factors, including the type of vehicle you own, its weight, the fuel type it uses, and its environmental impact.
4. Important things to know about Dutch taxes
Capital gains tax
Currently, the Netherlands does not impose a traditional capital gains tax. However, the belastingdienst assumes that your assets in box 3 generate a fictitious return, which is then taxed at a predetermined rate, regardless of your actual gains or losses.
On 19 May 2025, a new bill was introduced to the Dutch Parliament that aims to reform the taxation system for income derived from assets. The goal is to implement these changes by 1 January 2028. Under the new system, immovable property in box 3, as well as shares and profit-sharing certificates in start-up companies currently falling outside of box 2, will be subject to capital gains tax. Additionally, any positive appreciation in value will be taxed, while depreciation in value will be deductible.
Double Taxation
If you earn income in both the Netherlands and abroad, you may worry about being taxed twice. Fortunately, the Netherlands has signed double tax treaties with many countries to prevent this.
Whether and how double taxation applies to you depends on the terms of the relevant tax treaty between the Netherlands and your country of origin. You may still be required to file in both countries, but typically only one will have the right to tax a particular income source.
The 30% ruling
If you are a highly skilled migrant, you may be eligible for the 30% ruling, which is a tax advantage for expats. This ruling allows you to receive up to 30% of your gross salary tax-free for a limited period. However, in order to qualify, you must meet several conditions. These include being employed in the Netherlands, having been recruited from abroad, and possessing expertise that is scarce in the Netherlands.
Understanding a foreign tax system can be overwhelming, but you do not have to do it alone. If you are unsure which taxes apply to you, how to file, or whether you are paying the correct amount, our Dutch tax lawyers are here to assist you. Remember that failure to file or pay your taxes on time may result in fines or penalties from the belastingdienst.
