7 Tax Deductions You May Not Know About in the Netherlands
After arriving in the Netherlands, it might not be immediately clear how to handle your tax situation. What do you need to provide to the tax authorities? Have you included all the required information and documents? And also, the essential question of, have you opted for all eligible possible tax deductions? We want like to help you with seven important tax deductions in the Netherlands to keep in mind.
Non-Working Spouse Tax Credit
You or your partner might be eligible for the non-working spouse tax credit when either meet the following conditions:
- one partner has a taxable income
- the other has no taxable income
- you and your partner are registered at the same address for more than six months during the period of 1 January to 31 December (Dutch tax year)
- you and your partner are fiscal partners
Deductible Financing and Mortgage Costs
When you bought a house in the Netherlands in, for example, 2021, you might have incurred many extra costs in relation to the mortgage. These could come in the form of notary costs, taxation costs, mortgage interest, etc. These costs are, most likely, deductible in your income tax return for 2021. Not sure whether these costs are deductible? Your tax adviser should know which ones are and if they are deductible in your case.
Another option for declaring your mortgage costs is filing a provisional income tax return. You can file a provisional income tax at the beginning of or throughout the tax year. This is different from a regular income tax return, which you can only file starting from February/March in the following tax year. A provisional income tax return also has the benefit of receiving any entitled refund earlier. You will receive installments for this amount throughout the year. The provisional income tax return will give you estimated results based on your situation.
Note: It might be possible that you will have to pay a certain amount to the Dutch tax authorities instead of receiving a refund. The Dutch tax authorities will also ask you to transfer the amount in monthly installments.
30% ruling and Box 2 and 3
Concerning the 30% ruling, the effect it has for your income tax report is that you will be exempt from paying taxes over your box 2 and box 3 income (except for a second property in the Netherlands). If you have been granted the 30% ruling for only a part of the year, it can still be applied to your income tax return.
The other effect is on your annual income statement. Your employer decides how to apply the 30% ruling on your salary if they want to apply it at all. If you are unsure if the 30% ruling has been applied to your salary, contact your employer for this.
The general rule is you can only declare study costs related to your profession. Then, if you made study costs in the Netherlands, which you had to pay yourself and did not receive any study financing from the government employer, they might be deductible.
You will have to declare the years where you paid your tuition fee. Entitled refund(s) will apply to the year you started working in the Netherlands or those that came after.
Note: 2021 was the last year you could declare your study costs through the income tax filing.
When certain medical expenses are not reimbursed by your health insurance and are above the own risk and the income-related threshold, they might be deductible through your income tax filing. For example, costs for prescription treatments or treatments under the supervision of a paramedic such as an optometrist or dental prosthetist. If you’re unsure your costs are deductible, ask your tax advisor which are.
Certain donations costs might also be deductible in your income tax return. If the donation was made to an ANBI organization, you may be able to deduct the costs. Again, if you are unsure if the costs you have made are deductible, you can ask your tax advisor.
Self-Employed Tax Deduction
There are several self-employed tax deductions in the Netherlands. The self-employment rebate is an important one, which excludes you from paying taxes over a set amount. Important to know is that the start-up tax deduction may only be applied in the income tax return when you have worked for over 1225 hours for your company in the concerning tax year. You can apply this deduction for a maximum of 3 years in the first 5 of running your company. However, the Dutch tax authorities will be a little easier on the entrepreneur concerning the hour criterium due to the coronavirus pandemic. Between 1 January 2021 – 1 July 2021, the Dutch tax authorities will not look at the actual hours as other months as precisely. They mentioned that you can say you worked at least 24 hours a week for your company during these months. This also applies to the period of 1 January 2021 – 1 July 2021.
Also, think about the start-up tax deduction for new entrepreneurs. The start-up tax deduction is an extra tax-free amount on top of the self-employment rebate. For the tax year 2021, the amount of the self-employment rebate is € 6.670. This amount differs per year. As for the tax year 2022, the amount is € 6.310.
Note: The 1225 hours criterium also needs to be taken into consideration and certain conditions might apply.