Income tax in the Netherlands Guide, Meaning , Facts, Information and Description
In the Netherlands there is an income tax, which is roughly as follows. The fiscal year is the calendar year. Not later than March citizens have to report their income of the previous year. The system integrates tax with fees paid for the basic old-age pension system AOW, the pension system for partners of deceased people AnW, and the national insurance system for special medical care AWBZ. Below the term "tax" is used for the total. The figures are for 2004.Three categories of income, each with their own tax tariff, are distinguished. They are referred to as "boxes".
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2 Flat tax on income from a substantial business interest (box 2) 3 Flat tax on savings and investments (box 3) 4 Total tax |
There is a progressive tax on wages, profits, social security benefits and pensions.
For the value of an owner-occupied dwelling and for mortgage debt related to that, this box and not box 3 applies. Based on the value of the dwelling, a "fixed rentable value" is counted, while interest for the mortgage is deductible. The balance may well be negative, thus making the total income less than e.g. the wages.
An employer may set up an employee savings scheme allowing employees to save up to EUR 613 per year of their wages without paying income tax on that part of their wages, provided that they do not withdraw their savings within four years. The employer pays the income tax, but only a reduced rate of 15 %. During this period the savings are also exempted from the tax of box 3.
For taxpayers aged 65 or older (to be referred to as 65+) reduced rates apply for the first two brackets: 15.5 % and 22.45 %, respectively. The discount of 17.9 % of the income in these brackets corresponds to the AOW contributions, which are not owed by the AOW beneficiaries.
For employed and self-employed people there is an employment rebate of up to EUR 1,213 (more for people in the age range 57-64, up to EUR 1,935, less for 65+).
The wage withholding tax is a deduction of wages, social security benefits and pensions, as an advance payment for the income tax, paid through the employer, etc.
Progressive tax on wages, etc. (box 1)
Under certain conditions a life annuity is treated as a pension: premiums are deducted from the income, the benefits are taxed, and the scheme is not counted as asset in box 3.Flat tax on income from a substantial business interest (box 2)
There is a flat tax of 25 % on income from a substantial business interest, usually meaning a shareholding of at least 5% in a private limited company (BV ).