Aussies certainly don’t move to Europe for the low tax environment. If you are moving to The Netherlands from Australia or are an Australian in the Netherlands, here is an overview of the tax issues you should know.
1. The 30% Rule
Australians moving to The Netherlands should be aware that if you are recruited or transferred from abroad for employment in the Netherlands you may be eligible for the 30% tax ruling. The 30% ruling means that an employee’s taxable salary will be reduced by 30% to determine the tax liability to the Belastingdienst (Dutch Tax Office). The benefit of the tax reduction sits with the employer, and it is up to the employer and employee to negotiate whether some or all of the tax benefit gets passed on to the employee.
To be eligible for the 30% rule you will generally need to :
- be recruited from abroad,
- agree with your employer that the 30% rule applies,
- have specific experience or expertise that is not available in the Netherlands, and
- your gross annual salary needs to be greater than the salary threshold at the time.
Should your salary be greater than the salary threshold then you are generally considered to have satisfied the experience requirement. As of 2016, the salary threshold was approximately 37,000 Euro (with some exceptions depending on age and qualifications).
Other benefits of the 30% rule include being able to opt for “partial non-resident status”. As a non-resident for tax purposes, you will only pay income tax on Box 1 income, and no income tax on assets in Boxes 2 or 3 (see more explanation of Box 1, 2, and 3 taxes further on).
Another side benefit of the 30% rule is that you can simply swap your Australian drivers licence for a dutch drivers licence, rather than needing to sit a driving test in the Netherlands.
For more information, visit the english version of the Belastingdienst website.
2. Relevant Tax Treaty For Australians in The Netherlands
Australia and The Netherlands have entered into a tax treaty (or more commonly referred to as a double taxation agreement) which helps clarify the taxing rights of each country and to avoid double taxation of income.
The tax treaty between Australia and The Netherlands also helps to clarify the tax residency for Australians in The Netherlands. If you are considered to be both a resident for Australian tax purposes (under Australian law), and a resident for Dutch tax purposes (under Netherlands law) then the tax treaty includes provisions such that you can only be considered a tax resident of one of the countries.
The tax treaty also seeks to identify which country has taxing rights over different sources of personal income like wages, dividend income, capital gains, and rental property income.
3. Box 1 Income Tax (Employment Income)
Australians in The Netherlands need to understand the three different types of income tax in the Netherlands, which are usually referred to as Box 1, Box 2, and Box 3. If you are considered a dutch resident for tax purposes, you will need to declare your income and assets across all three boxes. If you are considered a non-resident for dutch tax purposes, then you will usually only need to declare your Box 1 income.
Box 1 is considered to be income from home and work. For most Australians in The Netherlands, what this means is that you would declare your employment income in this box. Other income that may also be declarable in this box includes income from a business or other professional activities.
The personal income tax rates are high in The Netherlands. The personal tax rates including the National Insurance Premium for 2017 are shown below. Please note however, there are a number of offsets and rebates available for people on lower incomes.
Marginal Tax Rate
19,982 - 67,072 Euro
4. Box 2 Income Tax (Substantial Interests)
Box 2 Income tax is tax levied on income arising from a substantial interest in a company. You are considered to have a substantial interest in a company if you hold more than 5% of the issued capital. Income derived from a substantial interest in a company is taxed at a flat rate of 25%.
5. Box 3 Income Tax (Savings and Investments)
The Netherlands treats income from savings and investments very differently to Australia. The Netherlands government assume that people will invest their “net capital” to make a 4% rate of return per annum, and are not interested in your actual returns from dividends, capital gains or interest.
For example, if your investments return a 10% dividend per annum, you will only be taxed assuming you made a 4% return. Similarly, if your investments make a negative return, you will still be taxed assuming you make a 4% return.
To determine your net capital you will need to aggregate the value of your global assets as at the 1st January each year and deduct the value of your debts on the same day.
The tax rate applicable for your deemed income on your net capital is 30%. So for every 10,000 Euro of net capital you have you will pay 10,000 x 4% x 30% = 120 Euro in tax per annum.
6. Tax Year
The tax year in the Netherlands is from 1 January to 31 December.
Keep an eye out for more country specific tax information for Aussies abroad. If you would like to contribute an article to support other Aussie Expats please contact us.
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Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.