Moving across borders can lead to quite some formalities and attention points to consider with regard to your tax and social security position. In this article we have listed the most important ones.
Registering in the Netherlands
When you move to the Netherlands you are obliged to register in the Key Register of Persons (BRP). This is also how you obtain a citizen service number (in Dutch: BurgerServiceNummer), which is used in dealings with the government and which you need for work, or to open a bank account, to buy or rent a house, to register your children at school, to see a doctor etcetera.
Depending on how long you intend to stay you either register as a resident or a non-resident. For civil law purposes you are considered a resident when you intend to stay for more than 4 months (viewed over a period of 6 consecutive months).
As a resident you should register in the Key Register of Persons in the municipality in which you intend to live. This should be done five days after your arrival in the Netherlands at the latest.
If you intend to stay for less than 4 months (during a period of 6 consecutive months) you are considered a non-resident for civil law purposes. In that case you register in the Dutch Register of Non-Residents (RNI) in one of the designated municipalities.
To make things complicated, the Dutch tax system also makes a difference between residents and non-residents, but in a different manner. From a Dutch tax perspective you are considered a resident when you have an enduring tie of a personal nature to the Netherlands. Whether this tie to the Netherlands is stronger than with any other country is irrelevant. When determining your tax residency all facts and circumstances should be considered in conjunction with each other. Circumstances to be considered could be:
• Do you have a permanent home at your disposal?
• Where does your family reside?
• Where do you work?
• Where do you usually stay? This could be derived from electricity bills, money withdrawals, fuel bills etc.
• Where do you receive medical treatment?
• Where do you have your subscriptions? (Phone, gym etc.)
Your tax residency determines how you will be taxed in the Netherlands: for your worldwide income (residents) or for Dutch-sourced income only (non-residents).
Dutch tax system
The Dutch tax system has divided taxable income into three categories:
• Income from work and one’s own home (box 1);
• Income from substantial interest (box 2);
• Income from savings and investments (box 3).
Each box has their own rate. Tax credits reduce the taxable income in the order of the boxes.
Personal income tax return
You are obliged to file an income tax return in the Netherlands when you have been invited to do so by the Dutch Tax Authorities or when you expect to have to pay more than EUR 48 in income tax.
The Dutch tax year starts on 1 January and ends on 31 December. The income tax return needs to be filed in the consecutive year. When exactly depends on your tax position and the type of form you should file, see the overview below.
Type of form Meant for … Filing deadline 2020 without extension
P-form Tax residents of the Netherlands 1 May 2021
C-form Non-resident taxpayers 1 July 2021
M-form The year of immigration/emigration The date mentioned on the invitation.
The obligation to file an income tax return is an individual obligation. However, you could also file a joint income tax return with your tax partner. A tax partner is someone you are married to or with whom you live together under a cohabitation contract or registered partnership. Even if you do not have a cohabitation contract you can still qualify as fiscal partners if you, among others, own your home together or if you have a child together. The advantage of filing joint income tax returns is that you can attribute certain (joint) income elements to your partner and vice versa, which could lead to a tax (rate) advantage.
Please note that when you do not have the obligation to file an income tax return, it can be beneficial to do so in case you expect a refund, for example from your mortgage interest deduction.
The 30%-ruling facility
The Netherlands has an advantageous facility for employees who are hired from abroad, called the 30%-ruling. It is meant for employees who are highly skilled and therefore meet a certain salary threshold (at least EUR 38,961 gross per year in 2021 (i.e. excluding tax free allowance), for employees who are 30 years or older). For employees younger than 30 years who have graduated at a Master’s Degree a lower salary threshold is applicable. The advantage of the 30%-ruling is two-fold:
• With this ruling the employer is able to grant a tax-free allowance consisting of maximum 30% of the taxable salary in the Netherlands.
• In addition, under the 30%-ruling you can choose to be treated as a partial non-resident for Dutch income tax purposes, meaning that for income derived from substantial interest (box 2) and savings and investments (box 3) you will be treated as a non-resident taxpayer. In other words in box 2 and 3 you will only be taxed on income derived from a Dutch source leaving foreign assets untaxed.
Please note that an application must be submitted with the Dutch Tax Authorities to be able to apply for this ruling in the payroll administration.
Another important point of attention when moving to and/or working in the Netherlands is your social security position. Chances are you will become obligatorily covered by the Dutch social security system. This means you are due national insurance contributions (usually withheld by your employer as a pre-levy via the payroll administration) and you are obliged to take out a health insurance in the Netherlands.
Of course moving or working cross-border also influences the social security coverage in your (former) home country. Coverage there could stop or, if it is not within Europe or if there is no social security agreement in place, there could be double coverage.
Finally, to avoid social security contributions being levied unduly, you could request a so-called A1-form (within Europe) or Certificate of Coverage (outside Europe with social security agreement) which shows under social security system you are covered and which can serve as proof that no contributions are due in the other country.
What can BDO do for you?
We hope the above has given you some more insight in the tax issues that you might face when moving to or working in the Netherlands. We will of course gladly assist with any queries in this regard, that is why we are a partner of the Expat Center for The Netherlands. BDO offers the following services:
• File a request for a residence and work permit for highly skilled employees;
• File a 30%-ruling request;
• Prepare your income tax return;
• File for an extension of the filing deadline that will give you 12 months extra to file your income tax return in the Netherlands;
• Determine your tax (residency) and social security position;
• Answer any questions related to pension, remuneration, employee participation plans etc.
Get in touch with Saskia or Marjolein today and receive your first consult free of charge!