THE DUTCH INCOME TAX SYSTEM EXPLAINED TAx SYSTEM In the Netherlands, income tax is charged on three different types of income, with each type of income classified into a separate regime or ‘box’ as follows: Box 1: Income from employment and home ownership Box 2: Income from substantial interest in a corporation Box 3: Income from savings and investments RESIDENCE The taxation of an expat working in the Netherlands depends upon whether the expat can be classified either as a resident or a non-resident taxpayer. Whether an expat can be considered a resident for Dutch tax purposes depends on the facts and circumstances. Based on Dutch case law, certain criteria are important for determining residence, such as family residence, the location of the expat’s permanent home, the intention of the expat, registration in a municipal register and the expat’s economic and social ties to the Netherlands. TAx TREATIES The Netherlands has concluded tax conventions with many nations. These conventions apply to people employed in the Netherlands but not permanently residing in the Netherlands. The employment income of foreign professors and other teachers – sometimes researchers as well – usually remains taxed in their country of origin for the first two years. INCOME TAx Everyone in the Netherlands is taxed on their income, wealth and assets (inkomstenbelasting). The amount of income tax (loonheffing) you pay depends on your level of income and will be automatically deducted from your monthly salary. 31 30% RULE Dutch employers may pay expats who have specific expertise that is scarce in the Dutch labour market 30% of their wages as a tax-free allowance for extraterritorial expenses, without the need to submit further evidence. Application of the 30% rule requires the permission of the Dutch Tax Administration. The expat and the employer will have to file a joint request to the tax authorities for this. The Tax Administration will assess whether the employee has scarce expertise, depending on their education, experience and income. • Dutch Tax Administration: Tax information, foreign countries: tel. 055 5 385 385 (in the Netherlands) Tax information, foreign countries: tel. +31 555 385 385 (from abroad) Monday to Thursday from 8.00 to 20.00, Friday from 8.00 to 17.00 • For no cure, no pay personal tax advice in the Netherlands, see Orange Tax Services Pagina 30

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