How Tax in the Netherlands Works

Types of Taxes in the Netherlands

In the Netherlands, there are different types of taxes paid at different moments. The main ones you need to know about are:

• Income tax: Paid on your personal earnings.

• Payroll tax (loonheffing): Automatically deducted from your salary by your employer.

• VAT (Value Added Tax): Only for businesses. You pay this tax on products and services you sell.

The Difference Between Dutch Income Tax and Payroll Tax

It’s important to understand the difference between income tax and payroll tax. Income tax is based on your total annual earnings and is declared once a year. Payroll tax, on the other hand, is deducted directly from your salary by your employer every month. Think of it as a pre-payment on your total income tax.

When and How Do You Pay Income Tax in the Netherlands?

Each year, you will receive a letter from the Dutch government when it’s time to file your income tax return. Filing is done online, and you will need a DigiD to log into the system. The annual deadline is typically in May, so make sure to submit your tax return on time. 

Most of the times, your employer will provide you with an overview of the hours and days you have worked. Read the article if you want to know more about the working hours in The Netherlands? 

What Is the Box System for Dutch Income Tax?

In the Netherlands, income is categorized into three different “boxes.” Each box has its own tax rate:

Box 1: 

This includes your salary, pension, and house ownership. It is taxed at the highest rates because it covers most of your day-to-day income.

Box 2: 

This includes income from substantial shareholdings (ownership of a company).

Box 3: 

This covers savings and investments, such as stocks or rental property income.

Understanding which box your income falls into will help you know how much tax you’ll need to pay.

Dutch Tax Benefits

In some cases, you might be eligible for tax benefits or deductions, such as:

• Payroll tax credit (loonheffingskorting)

• Health care allowance (zorgtoeslag)

• Various government subsidies or benefits, depending on your situation

These benefits can lower the total tax you owe, so it’s important to check if you qualify.

How to Calculate Tax in the Netherlands

If you want to know how much tax you’ll have to pay, you can use the income tax calculator from the Dutch Chamber of Commerce (KvK). This tool will help you estimate your taxes.

Calculate your income tax here

Do You Want to Work in the Netherlands?

Working and housing in the Netherlands comes with many advantages, including a fair tax system, great job opportunities, and support from the government. There’s a lot of work available, and you can easily find a job through Work in Holland.