Tax on Individuals


Dutch income tax is levied on individuals who are residents of the Netherlands and on non-resi­dents if and to the extent that they have income from sources in the Netherlands. If certain condi­tions are met, non-resident taxpayers residing in an EU-member state are considered resident taxpayers. Some resident taxpayers can opt to be taxed as non-resident taxpayers. Since there is no definition of “resident” in Dutch tax law, the tax residency of an individual depends on the circumstances in each case.

The most relevant facts and circumstances are:

  • the individual’s place of perma­nent home;
  • the place where the individual’s spouse and children live; and
  • the place of his or her personal and economic relations.

If a resident of the Netherlands leaves the Netherlands without becoming a resident of another state and returns within one year, this person is deemed to have been a resident for this entire period.


Resident individuals are taxed on their worldwide income. Income sources are divided into three boxes, each with its own tax rate. The taxable income in:

  • box 1: income from employment and dwellings (inkomen uit werk en woning).
  • box 2: income from a substantial inter­est in companies (inkomen uit aanmerkelijk belang);
  • box 3: income from savings and investments (inkomen uit sparen en beleggen).

Box 1: Income from employment and dwellings
Box 1 includes, among other things, the income from and expenses deduction in relation to:

  • business (winst uit onderneming);
  • present and past employment (loon);
  • other activities (resultaat uit overige werkzaamheden);
  • periodic payments and pensions (periodieke uitkeringen en verstrekkingen);
  • owner-occupied dwellings, including mortgage interest deduction (eigen woning).

The income derived from other activities includes income that cannot be considered business income or income derived from present and past employment (residual category). The income that falls within the scope of Box 1, less the personal deductions and allowances, is taxed at progressive rates of 37.1% for Box 1 income up to an amount of € 68,508 and 49.5% for Box 1 income exceeding that amount.

Box 2: Substantial interest in companies
Income falling within the scope of Box 2 includes dividends from a substantial interest in resident and non-resident companies. An individual is considered to have a substantial interest if the individual – alone or together with a spouse or partner – directly or indirectly owns  at least 5% of the issued share capital or at least 5% of a particular class of shares in a resident or non-resident company. A substantial interest may also exist if a lineal ascendant or descendant of the taxpayer owns a substantial interest in the same company. The tax rate applicable to Box 2 income is 26.9%.

Box 3: Income from savings and investments
The worldwide net value of the assets of a tax­payer on 1 January of a tax year is deemed to produce a net yield that ranges from 1.898% to 5.69% depending on the net value of these assets. This yield is taxed at a flat rate of 31%. Consequently, income from savings and investments is taxed at a flat rate of approximately 0.59% to 1.76%.


Employment income is subject to Dutch income tax in Box 1 and includes wages and salaries, sickness benefits and certain social security payments. However, in most cases, employment income will have already been taxed by means of a withholding tax (wage tax or in Dutch: loonbelasting), which is a prepayment by the employer of the employee’s income tax.


If an employee receives remuneration in kind from his or her employer, this remuneration must be valued at fair market value and is taxable as employment income. If the employer provides the employee with stock options that are priced lower than the market value, the difference between the acquisition price and the fair market value of the stock option is taxed as employ­ment income. Capital gains realised on the sale of the stock options are taxed at the time of the exercise or transfer of the option.


If certain conditions are met, pension benefits granted individually or collectively are exempt from tax until retirement. In the Netherlands, the EET system applies. Employee contributions are not taxed; investment returns on acquired benefits are exempt; and pensions in payment are taxed.


For Dutch income tax purposes, managing directors are considered employees. Their remuneration is taxable as employment income, and all rules applicable to employees apply. The tax position of supervisory board members depends on the applicable facts and circumstances and requires special attention.


Some expenses relating to income in Box 1 and Box 2 may be deducted, depending on detailed rules. The expenses relating to income in Box 3 are not deductible. Liabilities may, however, be deductible from the taxable base. There are allowances for all residents and for employees, as well as allowances depending on the taxpayer’s personal situation.


For 2019 the progressive tax rates (including social security contributions) for Box 1 are as follows:

  • Income below €68,508: 37.1%;
  • Income above €68,508: 49.5%.

The tax year is the same as the calendar year.


Withholding tax or payroll tax is usually called “wage tax” (loonbelasting) in the Netherlands. Employers are obliged to withhold wage tax on salaries and other taxable remuneration paid to their employees. Benefits relating to a company car are also subject to wage tax. The wage tax due is a prepayment of income tax and is credited against the final income tax liability. The withholding also includes national social security contributions. For the applicable tax rates that generally apply we refer to section 12.2 above.


If an employer provides an employee with a car, the employee may use this car for private purposes as well. The benefit of a car provided by the employer is subject to wage tax, based on a percentage of  the official dealer price (original value) of the car. This benefit ranges from 12% to 22% of the official dealer price of the car. However, if the employee proves that the car will not be used for private purposes for more than 500 kilometers a year, the benefits from this employer-provided car are not subject to any wage tax.


If an employee uses his or her own car for business reasons, the employer may compensate the employee’s travelling expenses, up to a maximum of €0.19 per kilometer. This compen­sation is not subject to wage tax. If the actual compensation exceeds €0.19 per kilometer, the surplus will be subject to Dutch wage tax.

If an employee travels by public transport, the actual travelling expenses or €0.19 per kilometer may be compensated. This compensation is not subject to Dutch wage tax. If the actual compensation exceeds €0.19 per kilometer, the employer has to keep the compensated tickets, and the surplus will not be subject to Dutch wage tax.


The system for reimbursing employees’ expenses is currently based on the Work-Related Costs Scheme (werkkostenregeling). This regulation enables an employer to spend a certain percentage of its total payroll expenses on the reimbursement of employees’ regular costs, without such reimbursement being subject to wage tax (either by the employee or as a gross-up for the employer). The percentages are as follows:

  • 3% of the employer’s total payroll expenses up to an amount of €400,000; and
  • 1.18% of the total payroll expenses exceeding that amount.

It is for the employer to decide which employee is entitled to make use of this budget and to what extent. It will still be possible to reimburse the specific costs referred to in the Dutch Wage Tax Act 1964 outside the scope of this budget.


Residents and non-residents are subject to inheritance and gift taxes if they acquire property by inheritance or gift and the deceased or the donor was a resident of the Netherlands at the time of death or the gift. If the deceased or the donor is a non-resident, inheritance and gift taxes are payable for certain types of property situated in the Netherlands. If a person with Dutch citizen­ship emigrates to another country, this person is deemed to be resident for the purposes of inheritance and gift taxes for ten years after the date that he or she emigrated. Persons who do not have Dutch citizenship and who have been resident in the Netherlands remain liable for gift tax in the year following their departure. Inheritance tax is payable by the beneficiary. However, Dutch tax authorities may recover from all beneficiaries the tax debt of any non-resident beneficiaries. The recipient is subject to gift tax. However, the donor and the recipient are equally liable for its payment.


The tax rates for inheritance and gift taxes are the same. The progressive tax rate depends on the proximity of the relationship between the deceased or the donor and the beneficiary or the recipient, and may vary between 10% and 40%.


Foreign taxes are deductible as a liability on the inheritance or gift received. The Netherlands has concluded bilateral tax treaties on inheritance taxes with several countries, including Finland, Israel, Austria, the United Kingdom, the United States, Sweden and Switzerland.


Resident taxpayers may receive relief from double taxation by way of a tax exemption or by way of an ordinary tax credit. Unilateral relief from double taxation is calculated separately for each box in accordance with the special rules applicable to these boxes.


If an employee leaves the Netherlands, specific tax rules apply to pension and other retirement benefits. The leaving resident receives a tax assessment from the Dutch tax authorities for his or her current pension claim. In certain circumstances, the leaving resident is allowed to suspend the payment of the assessment for a period of ten years. If and to the extent that the leaving resident retires and draws the pension and other retirement benefits within the ten-year period, the suspension ends and the tax owed is collected by the Dutch tax authorities.


If certain conditions are met, an inbound expatriate coming to the Netherlands can take advantage of an allowance called the “30% ruling”. One of the conditions is that the inbound expatriate must have some sort of “specific expertise” that is scarce in the Netherlands (based on his or her level of education, level of experience and level of remuneration). Another important condition is that the expatriate must have been, prior to his or her assignment abroad, residing at least 150 kilometers from the Netherlands.

As a result of the 30% ruling, 30% of all the inbound expatriate’s taxable benefits – which in this case includes allowances for housing and compensation for local costs but not schools fees, which are allowed separately – can be paid tax-free as compensation for “extra-territorial costs” for a maxi­mum period of five years. Both the employer and the employee must file a request to apply for the 30% ruling. The 30% ruling only applies if the Dutch tax authorities have approved the request.

The allowance includes the option to be treated as a non-resident for the income reported in Box 2 and Box 3. The 30% allowance is not included in pension calculations, which is an advantage for the employer that may be reallocated by adding the saving to the employee’s income, which in turn results in a higher 30% allowance. The allowance is also not included in social security calculations.


A specific 30% ruling also applies to Dutch employees performing certain specific activities in another country or who are seconded to certain developing countries.


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Sylvia Dikmans
Partner Tax



Jeroen van Mourik
Partner Tax



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Last updated September 2021