J.C. Suurmond & zn. are Dutch tax consultants with an international perspective and have been providing tax solutions for expats and businesses in the Netherlands since 1986.
It is almost tax return time, as you may have heard around you. Please note, the deadline is May 1.
New tax plan
As you may have heard of a couple of months ago the new Dutch government, established late October 2017, agreed upon a new tax plan to be introduced in 2019.
This new tax plan involves an enormous number of changes. There are so many adjustments to rates, deductions, levy rebates etc. that it is difficult to see the actual end result.
We have selected the changes that will be the most relevant to expats, including the effects they might have on your 2017 tax return:
1. The mortgage interest deduction will be limited further
In steps of 3% per year, the mortgage interest deduction will decrease to the tax rate in the proposed first bracket of 36,93%. During 2017, your mortgage is deductible at a maximum rate of 50%, if the deduction takes place in the current fourth tax bracket (for an income exceeding 67.000 euros).
2. Corporate tax rates
Corporate tax is levied on, amongst others, BV and NV companies. The corporate tax rates of (currently) 20% and 25% will be decreased to 16% and 21%. At the same time, the box 2 rate - which is applied when taking monies out of your business - will be increased from 25% to 28,5%. These changes will take place over a period of three years. This change should make the Netherlands more attractive for (foreign) corporate companies.
3. Wealth tax
Included in the Dutch income tax system is the box 3 tax, which in effect can be seen as a wealth tax. The tax base for this is basically 4% of your net wealth. In the past, the tax rate was a flat rate of 30%, so the tax, in effect, was 1,2% of your net wealth.
In 2017, this was changed into a bracket system. In 2017, these brackets will be 0,861% for net assets between 25.000 euros and 100.000 euros, 1,38% for assets between 100.000 euros and 1.000.000 euros, and 1,617% for assets exceeding 1.000.000 euros. If your taxable assets equate to less than roughly 200.000 euros, the new rates will be favourable to you.
4. The number of income tax brackets will be reduced to two
Currently, income tax has four brackets, with a top rate of 52%. These rates apply to, amongst others, salary and pension. These will be reduced to two brackets of 36,93% and 49,5%. The second bracket will start at approximately 68.000 euros. This change will most likely take place in 2019. The idea is that work must profit more.
By the way, once you have calculated your taxes applying the above rates, levy rebates are applied that limit the tax somewhat. It is still unclear how the social security contributions will be calculated in the new system. These used to be included in the tax in the first two brackets for income up to approximately 34.000 euros.
So, there will either have to be a separate bracket for the social premiums, or the social premiums percentage will need to decrease. These bracket changes do not yet apply to the 2017 tax return.
5. 30% ruling reduced to five years
Instead of the current maximum period of eight years that the 30% ruling applies to, decreasing the maximum period to five years has been proposed. It is not yet clear when / if this will apply and what legislation will be drafted for existing 30% ruling situations.
Also, don’t forget about the impact of the 30% ruling on your assets! If you or your partner makes use of the 30% ruling, assets other than Dutch real estate do not need to be stated. If the 30% ruling comes to an end, you will have to declare foreign assets. It is important that you are aware of your tax duties. If you own foreign property you can ask for a double taxation deduction.
2017 tax return
The 2017 tax return can be submitted from March 1 onwards until May 1. If you need more time, you can request an extension online before May 1. Usually, an extension will be granted until September 1. Often, tax advisors can request an even longer extension.
With or without new tax rules, there are quite a few ways to benefit from the Dutch tax system. Therefore, it is always good to check if you need to file a tax return, even if you did not receive an invitation from the tax office. You can even file your tax returns with retroactive effect for up to five years.
If you want to make sure you are getting the most out of your tax return, it might be smart to consult a specialised expat tax advisor. Lennart Suurmond is a tax advisor at J.C. Suurmond & zn. Need advice on the best way to file your 2017 tax return?