Demystifying the dutch tax system: a guide for expats

Living in the Netherlands means being subject to various taxes collected by the Belastingdienst. To navigate through the complexities, here's a concise guide to Dutch taxes:

Income tax:

If you earn income while residing in the Netherlands, you are required to pay income tax. Each year, you must file an annual tax return, which can be done online or with the assistance of a tax advisor. For employees, income tax is withheld from their monthly salary as wage tax, while self-employed individuals must calculate and declare their income tax through the annual tax return.

Payroll tax:

Payroll tax is the wage tax withheld by employers, including national insurance contributions for pensions, unemployment allowances, and other Dutch benefits. When discussing salary and employment contract terms, it's essential to consider the deduction of payroll tax, as it affects the net salary received after deductions from the gross salary.

VAT sales tax:

Apart from income and payroll tax, the Tax Office collects revenue tax through the Value Added Tax (VAT), known as BTW in Dutch. Most businesses add BTW to the prices of their goods or services, with either a 9% or 21% rate depending on the type of service. Businesses declare their earned and spent BTW via quarterly sales tax declarations to the Tax Office.

Annual tax return:

Between March 1st and April 30th each year, individuals are required to file their annual tax return, reporting their income and relevant deductions.

General & labour tax credits:

Taxpayers receive two types of tax credits: the general tax credit and the labour tax credit. Both credits are automatically calculated and credited by employers based on income levels. For self-employed individuals, tax credits are calculated when filing the annual tax return.