I am a UK national temporarily living in the USA and South America, I
am currently considering taking on a consulting contract in the
Netherlands for approx 1 year, and I wish to mitigate / avoid any
Dutch tax,
Normally I work as a consultant on a self employed ltd (limited
liability company, currently UK registered with myself as director)
going through an agent (which could be based in UK, Ireland or Dubai)
who I invoice on a monthly basis, they then pay me and they in turn
invoice the company that I would be working / consulting with at say
+10% and get their cut.
If I sent up a offshore company say based in Bermuda or similar with
zero tax, or someone I know and trust set up a company and ordered me
to go work in the Netherlands and I received my wages paid from said
offshore company, which had no base in Netherlands would I still be
liable for Dutch tax?
Any other creative ideas / input on how to legally circumnavigate the
Dutch tax regime?
(I believe that if you work in the Netherlands you are liable for tax
from day one, but you could claim 30%, I'm aware of the 183 day etc
etc please see below what I have cut n pasted from various web sites)
In some cases, it would be beneficial, from a tax standpoint, to claim
exemption under a Double Tax Treaty, i.e., if your other country of
tax residence levies much lower taxes. In other cases, whilst the tax
liability may be broadly similar (e.g., as with the UK and Germany
assuming the 30% ruling is applicable ? see below), claiming exemption
under a Double Tax Treaty offers administrative convenience and
savings in professional fees (payroll bureau, tax return filing etc).
In the Netherlands, if the criteria of a relevant Double Tax Treaty
are satisfied then there is no requirement to submit a formal claim
for relief; rather, exemption may simply be assumed. The other
criteria are that you are paid by a non-Dutch company and that the
costs of your employment are borne by a non-Dutch company. You should
not, generally, have a problem satisfying these criteria.
Double Tax Treaties
If you are in The Netherlands for less than a relevant 183 day
(approximately six months) period and are tax resident (and paying
taxes on your salary/benefits) elsewhere then it may be possible and
desirable for you to claim tax relief under a particular Double Tax
Treaty. The relevant 183 day period is either 183 days in a calendar
year or in any period of 12 months, depending upon the particular
treaty involved. The Double Tax Treaty with the UK, for example, looks
at a period of 183 days in the Dutch tax (which is a calendar) year.
So, for example, you could work in the Netherlands from 1 August
through to the following 31 May and, whilst being ordinarily taxable
on your salary and benefits in the Netherlands for this period by
performing your duties there, could claim to be exempt from Dutch tax
under a Double Tax Treaty for the entire period. This is on the
understanding that, during the period, you were tax resident in
another country and paying taxes on your salary and benefits there.
In some cases, it would be beneficial, from a tax standpoint, to claim
exemption under a Double Tax Treaty, i.e., if your other country of
tax residence levies much lower taxes. In other cases, whilst the tax
liability may be broadly similar (e.g., as with the UK and Germany
assuming the 30% ruling is applicable ? see below), claiming exemption
under a Double Tax Treaty offers administrative convenience and
savings in professional fees (payroll bureau, tax return filing etc).
In the Netherlands, if the criteria of a relevant Double Tax Treaty
are satisfied then there is no requirement to submit a formal claim
for relief; rather, exemption may simply be assumed. The other
criteria are that you are paid by a non-Dutch company and that the
costs of your employment are borne by a non-Dutch company. You should
not, generally, have a problem satisfying these criteria.
The same approach will not work with regard to any dividends you
receive from your limited company where you become a Dutch tax
resident under either of the provisions outlined above. However, this
dividend income is taxable at a flat rate of 25% which is, in itself,
far more beneficial than in many countries. Furthermore, dividends
received from any company in which you do not hold a ?substantial
interest? (as defined in Dutch tax law) is exempt from Dutch tax.
Expat tax in the Netherlands explained
Mindy Ran leads a short tour through the fiscal maze of annual tax returns.
The Dutch tax system, especially for an expat, is anything but simple.
It is therefore strongly advised that you speak with a financial
adviser or accountant. You can also get a brochure in English
(Taxation in the Netherlands) produced by the Ministry of Finance.
While the Tax Office (Belastingdienst) has made an effort to make the
system more accessible for Dutch language users with CD-ROMs, the
possibility of email forms and (some) information translated into
English, the language remains legalistic, and the system not yet
streamlined enough.
Mistakes - for either residents or non-residents whose income or
citizenship spans more than one country - can lead to paying or owing
taxes in more than one country.
Tax vocabulary
Alimentatie ? alimony/maintenance
Aftrekpost(en) ? deduction(s)
Aanmerkijk belang ? substantial holding
Bizittingen ? possessions
Belasting ? tax
Belastingdienst ? tax office
Belastbaar inkomen ? taxable income
Durfkapitaal ? venture capital
Eigen huis ? your home
(Hypotheek)renteaftrek ? (mortgage)
interest relief
Inkomen ? income
Kinderopvang ? child care
Korting - deduction
Loon ? wage/salary
Lijfrente ? annuity
Pensioen - pension
Premies ? premiums
Rekenhulp ? calculator
Uitkering ? benefit
Werkgever ? employer
Werknemer - employee
? Tax disk
? Types of taxes
? Resident or non-resident
? Income tax
? Salaries tax
? 30 percent ruling
? Links
Tax disk
The Netherlands is moving towards digital filing at the expense of the
humble paper-based forms. Anyone who has received a blue envelop
containing a computer diskette is obliged to complete and file their
returns for the 2004 tax year by 1 April 2005.
The disk is designed to be easy to use; it is if you have little to
report to the tax office and you read enough Dutch to navigate the
questions. The disk has an extensive help menu (in Dutch) and an
ordinary calculator and a rekenhulp (calculator help) function to help
you tot up your costs. (You are not obliged to use the Rekenhulp if
you don't want to let the tax office in on all the secrets.)
Once you have completed the form, it is a matter of saving the
information on to the disk and returning it in the envelop supplied.
You can also send it over the internet.
If your language skills aren't up to it, perhaps your Dutch partner or
friend help you. Ask yourself, though, whether you are confident their
advice will be spot on. The tax office is sent thousands of
incorrectly completed forms every year and it generally comes back
looking for additional information.
Unless you are satisfied you can come to grips with your tax returns,
it is probably better to seek professional advice.
Nevertheless, whether you opt to file the information yourself or pay
a professional to do it on your behalf, it is worthwhile having a
general idea about the Dutch income tax returns in the Netherlands.
Personal taxes
Individuals can be liable for the following taxes: income, salaries
and social security contributions, corporate income, dividend
withholding tax, inheritance and gift tax, value-added tax (BTW),
motor vehicle tax, environmental taxes and local taxes.
This overview highlights only the main areas of personal taxes:
income, salaries and social security contributions and the so-called
30 percent ruling.
Resident and non-resident taxpayers
Getting advice can save time and money in the long run
For the purposes of determining tax in the Netherlands, the first step
the Belastingdienst will take is to determine your residency status.
Several factors are considered, including location of family home,
employment, and registration in a municipal register.
There is technically no legal definition of a resident, but the
working rule tends to be that you are NOT a resident if you are in the
Netherlands for less than 183 days a year, the location of the family
home is in an another country, and/or that the company you work for
does not have an office or branch in the Netherlands.
However, under certain circumstances, you can be considered as a
resident for the purposes of taxation or a non-resident taxpayer who
qualifies for the 30 percent ruling.
It can have far reaching and long-term impacts on tax and eventual
residency questions as to how residency is defined in terms of tax. Be
sure to get advice.
Residents are liable for income tax on income from all domestic and
foreign sources including business income, employment income,
investment income and income from periodical benefits.
Non-resident taxpayers are taxed on Dutch business income, employment
income, income from real estate in the Netherlands and income from
periodical benefits and shareholdings in Dutch companies.
As well as residency, other personal circumstances such as marital
status and whether the couple are taxed individually or not, children,
ownership of a car, ownership of a house, your employment status,
healthcare costs and other assets and expenses are taken into account
when assessing the amount of taxable income.
Personal allowances are also dependent on the individual's
circumstances and vary widely, depending on age and family
circumstances (number of children, married or single, single parent,
disability, home owner, etc).
Residency categories
? Resident taxpayer: income tax is owed in the Netherlands on your
entire, worldwide income
? Non-resident taxpayer: Dutch income tax is only due on income from
certain sources in the Netherlands
? Non-resident taxpayer who chooses to be treated as a resident for
tax purposes (see resident, above)
? Partial non-resident taxpayer: a specific category for those who can
benefit from the 30 percent ruling.
Married couples can either be taxed together or individually, even if
both spouses are residents in the Netherlands. There are often tax
advantages to being taxed individually.
If taxed separately, then you are taxed on personal income, allowances
and premiums. Investment income and non-source related deductions are
attributed to the spouse with the highest personal income. If only one
spouse is resident in the Netherlands then their incomes are
considered completely separate.
Income tax
Dutch income tax is divided into three categories of income:
Box 1 is for income derived from work and home and is subject to the
rates below based on your taxable income (after deductions allowed for
personal circumstances).
Box 2 is for income for shareholdings defined as substantial (i.e.
either you or you and your spouse own more than 5 percent of a limited
company which has public stocks or shares).
Box 3 is for is for income from savings and investments (including
what used to be the Wealth tax) and is currently taxed at 1.2 percent.
For the purposes of taxation, taxable income is defined as the sum of
income from the three boxes above (minus creditable deductions and
personal allowances).
The main rates applicable for taxable income in 2004/5 are;
- 33.55 percent on first EUR 16,265 (includes social security and tax)
- 40.50 percent on next EUR 13,278 (includes social security and tax)
- 42 percent on next 21,109 (tax only, social security paid separately)
- 52 percent on surplus (tax only, social security paid separately)
(People over 65 pay 15.65 and 22.60 percent on the first two
categories and 42 and 52 percent on the last two.)
- 25 percent for income from substantial holdings (Box 2)
- 30 percent for income from savings and investments (Box 3)
Salaries tax
Salaries Tax and Social Security contributions are levied jointly and
are automatically withheld by the employer. The salaries tax serves
as an advance charge, and is issued with an income tax return and
assessment.
If your only income is from one source at a regular salary, there
should be no bill at the end of the year, but you can then file for a
refund from your deductions and allowances.
The dividend withholding tax works in a similar fashion and serves to
avoid huge lump sums being due at the end of the year. The company
paying dividends withholds a standard rate of 25 percent tax when
paying dividends. Both this and the wage tax serve as a "deduction at
source" for income tax.
30 percent ruling
To be considered as a non-resident, or partial non-resident taxpayer
and therefore eligible for the 30 percent ruling, a specific request
must me made to the tax authorities which proves that you are bringing
skills and knowledge which are scarce in the Netherlands and therefore
must be recruited from abroad.
The facility allows the employer to grant a tax-free lump sum
allowance for the extra costs of the employee's stay in the
Netherlands (extraterritorial costs).
This lump sum allowance amounts up to a maximum of 30 percent of the
sum of the wages and the allowance. The 30 percent ruling means, in
very simplified terms, that you receive up to 30 percent of your wages
tax-free. This has the effect of reducing the salary tax. |
