Filing Dutch Taxes 101 for 2020
The dreaded tax season is upon us and those blue envelopes are popping up all over the Netherlands. Whether this is your first Dutch tax return or twentieth, there are always changes to the system, and your life, to be mindful of. Hopefully, this information on filing your Dutch tax return in 2020 can help you stay up to date and informed with what’s new, old, and adapted!
Do I need to file a tax return?
As a general rule, consider the answer YES. You’ll learn about the primary situations where you wouldn’t need to here as well, but even in that case, you should still file! If you live and/or work in the Netherlands, you’ll likely receive a request by mail.
The two most important times you need to file are:
1. If You Receive a Letter Requesting It
This is not so much a request but a requirement. When you receive a letter from the tax office, it will always be in a blue envelope. In addition, if you have a DigiD, you can log into your MijnOverheid account and you’ll also receive it in your “Berichtenbox”.
We highly recommend setting up these accounts asap so you stay informed. The tax office will assume you have received the letter regardless of whether or not you did. Be sure to allow some time, however. The DigiD takes a few days to receive your request and you will also need to activate it across your devices.
You can also subscribe to email notifications when there is a message in your MijnOverheid account so you’re sure not to miss anything.
In other words, you are still required to submit a return if:
- You do not receive a physical letter but it is sent to your digital inbox
- There is no income to report for the filing year
- There are no taxes owed
2. If You Owe Money
Tax authorities are notorious for making sure they get their dues. If you owe more than € 47, you are in principle obliged to file a Dutch income tax return and/or expect to receive a letter. Even if you happen to not receive one, you’ll still want to submit a return in order to avoid penalties and/or interest.
A few reasons you may need to pay extra taxes include if:
- You have an amount in your savings or investments above the designated threshold
- You have income from more than one job
- The wage tax withholdings made by your employer were not correct or not sufficient to cover your annual income tax liability.
We all want to avoid paying anything extra, so regardless of receiving a letter, the safe and smart decision is to file anyway. That being said, there is technically no obligation to file if you owe less than €47.
You can use a free tax calculator to get an idea of the amount that you may be required to pay to the tax office. This calculator will estimate the total that will go into “box 3” of your tax return if you have income from only one employer.
3. Bonus: If You Are Owed Money
There are a few situations where you don’t have to file a tax return, but it is to your benefit to file anyway. The most obvious being if you will receive money back! Just note that refunds under €16 will not be paid out.
You may be owed money if you have certain tax deductions or if the taxes taken from your income are higher than those that need to be paid. This may be possible, for example, if you started or ended your employment during the 2019 filing year (equal to the calendar year).
Lastly, one opportunity which is often missed: Averaging out (“Middeling”). It may be a good option if you have fluctuations in income over a designated (consecutive) 3 years. Please note that a refund threshold of €545 is applicable. This requires a detailed review of feasibility. This would be best applied if you have large projects during some years but not others, for example.
If none of the previous situations apply, you might benefit from this averaging out of your taxes over three years, but you require a tax assessment/approval by the Belastingdienst. To obtain this, filing a tax return is required.
What form should I use?
Depending on what your personal/income situation is, there are a number of different tax forms available, each with a specific purpose. The most common forms are:
P: Used by employed residents of the Netherlands for the entire year
M: Used by partial-year residents
W: Used by entrepreneurs
C: Used by non-residents (citizens not living in the Netherlands)
You should also be aware that non-residents will be required to submit a Personal Income Statement along with their returns.
If you received an invitation letter from the Dutch tax authorities, you should file the form mentioned in the invitation letter. If this is – or could be – the wrong form, you’ll need to request a change of form (so the tax authorities can record the change in their system). Then you must file the updated form, as your previously filed return will be not be accepted.
If you have questions regarding which is the correct form for you, you can call the Belastingdienst and ensure you’re filing the correct one.
Is There a Deadline to File?
Yes, you’ll want to submit your return by May 1st, 2020 for the 2019 filing year. In some cases, you can extend your deadline beyond that. Registered tax advisors can generally do this for you and it typically allows you until September 1st.
If you file after the May 1st deadline, penalties and/or interest may also be added if you owe money. So avoid the extra costs and take care of it ASAP!
In addition, if you file before April 1st, the tax authorities can guarantee a response before July 1st, 2020. This way, if you’re getting money back, you will also receive this by the same date.
Filing early is also appealing if you owe additional taxes so that you are not charged penalties or interest.
What Changes has the Coronavirus had on Filing Taxes?
If you need to request an extension, call the tax office’s English speaking department at +31 555 385 385. You will then have until September 1, 2020, to file (it is advised, however, to call before May 1, 2020).
There are many different consequences that have occurred due to the recent Coronavirus pandemic. For employers, entrepreneurs, people dealing with customs challenges, or those working/living across the border, there are solutions for you. You can request a deferment of tax payments by clicking the button at the bottom of the Belastingdienst website (in Dutch).
Why Might I Be Charged a Penalty?
There are, unfortunately, a number of cases where the tax office may add fees to your taxes due. Fines may be implemented if one of the following situations occur:
- You do not submit your declaration (or not on time)
- You enter your declaration incorrectly or incompletely
- Your assessment tax is not paid on time (examples include: income tax, corporation tax, inheritance tax, and gift tax.)
Procrastination is not your friend when it comes to the tax authorities so be sure to file and file early if possible. Otherwise….
How Much Might I Be Charged if Penalized?
Depending on the offense, there are many different amounts and ways you can be fined. Only some of which include:
- If you do not file a return on time (or at all), an administrative fine of €65 will be applied and penalties can amount to as much as €5,514
- The default penalty is €385 if you do not file your income, gift, or inheritance tax return (timely).
Can I File Online?
The remarkable efficiency of the Dutch means you’re able to file either electronically (by default) or by physical mail (M-forms). The assumption in the Netherlands, however, is that you want to file electronically. Nowadays, the tax return is largely pre-filled by the Dutch tax authorities. However, if you want to get the most optimized tax position, we advise using a tax provider to file your Dutch tax return for you. If you want to file a paper tax return you need to request one by calling the tax office at 0800 0543.
If you are an entrepreneur, however, the paper version is not an option. You are only allowed to file electronically.
When filing online, you can use the software directly on the Belastingdienst website by logging in. Utilizing the Dutch tax authority’s system is very useful for basic filings, but does not have the flexibility of an advisor’s customized system.
Another option is to hire a tax advisor. That way your tax return is customized to you by a professional. Just be sure to weigh the costs and benefits of paying for someone vs. the refunds you may be entitled to. Hiring an expert could, however, provide you more options to protect and defend against any potential issues in the future. Did you know that in the current year 2020 it is possible to file your tax returns back to 2015? This is possible if you expect a tax refund or when you owe your taxes.
When Can I Start the Filing Process?
You will be able to submit your return as soon as the tax offices have released their data to you which is not until March 1st, 2020.
Tax advisors are also able to your return prior to March 1st which places it in a holding position. With this, it will be sent as soon as it’s allowed to be. This all happens on your advisors’ and the tax authorities’ systems so you won’t have to do anything once you’ve submitted.
Is There Anything I Can Do Until My Taxes Can Be Filed?
Definitely! If you collect all of your income, investment, and expense data for the filing year, you’ll be well-prepared. Click here to view a handy checklist of what you can start searching for.
Getting everything even in one folder will help you (and your tax advisor) complete everything quickly and painlessly.
We know the tax season is difficult no matter the country so we hope this helps clarify some confusion. If you need further assistance with your Dutch tax return, the experts at Tax Direct would be happy to help!