Circumstances can be challenging if you are an expat living in a foreign country, where there are different rules. As an expat, your tax situation could prove more complicated than initially expected. With the high inflation and the new Dutch government cabinet introducing amendments to tax laws, it is worth the extra effort to stay well-informed about your tax matters.
Below is some key information to help with filing your taxes as an expat living in the Netherlands in 2024.
The Netherlands tax structure for 2024
Income tax in the Netherlands is separated into three categories, known as boxes. Box 1 is taxes for income derived from work and homeownership, Box 2 is for interest received from a substantial interest (>5%) and Box 3 is for interest earned on savings and investments.
Compared to 2023, there are no major changes in 2024 for savings and investment tax (Box 3). Expats can expect to pay tax on all their wealth, including a second home, savings and shares. Savings in bank accounts are taxed at a lower rate than other assets, so expats can take advantage of this.
In 2024, tax-free wealth remains the same as in 2023 at EUR 57,000 (EUR 114,000 for tax partners). Based on the asset mix between savings, shares and property, an average return is calculated on the total assets by deducting one’s debt from their total asset value. The rate of the fictitious return in Box 3 was 32 percent in 2023. This rate will be increased to 36 percent in 2024.
In September 2023, former State Secretary of Finance, Marnix Van Rij, issued a proposal for the new Box 3 system changes starting in 2027. Under the newly proposed system, assets in Box 3 will be taxed following a capital gains system. This means taxpayers will be charged a higher tax rate under Box 3. One of J.C. Suurmond & zn.’s tax advisors can inform expats about Box 3 developments and advise them on what the best tax-saving options and opportunities are in their situations.
Double taxation treaties
The Netherlands has double taxation treaties with several countries to ensure that residents in the country are only taxed once on their income. Some countries the Netherlands has taxation treaties with, include the UK, Luxembourg, South Africa and Belgium.
Useful links:
- For a full list of countries that have taxation treaties with the Netherlands, visit the Tax Administration’s website.
The Netherlands 30 percent tax ruling
The Netherlands 30 percent tax ruling is a tax benefit that enables employers to pay highly skilled expats 30 percent of their salary tax-free for five years. If your 30 percent ruling ended in 2023, you are now regularly taxable in the Netherlands, also for your worldwide assets (Box 3 tax). Expats should remember to declare these in their 2024 tax return.
Limitations of the 30 percent ruling
The 30 percent rule for new employees was limited to the WNT norm (also known as the Balkenende norm) in 2023. This norm was EUR 223,000 annually in 2023, from 1 January 2024 this will be EUR 233, 000. This implies that the 30 percent rule will not be taxed on the portion of income surpassing this amount. High-earning expats may be negatively affected by this change to the 30 percent rule and are advised to speak to a tax professional for more guidance on this.
Two amendments were implemented to the 2024 tax plan to limit the application of the 30 percent ruling. One amendment concerns the partial non-domestic tax liability for 30 percent rulings, which no longer applies from 2024 onwards. Fortunately, transitional regulations apply to existing 30 percent rulings, allowing partial non-domestic tax liability to continue until 2026.
The benefit percentage on income will also be gradually eliminated from 1 January 2024. For the first 20 months, 30 percent of the salary will remain tax-free. For the next 20 months, 20 percent will be tax-free and for the 20 months thereafter, only 10 percent will remain tax-free. The old rules will remain in force for the entire duration for cases existing as of 1 January 2024. Therefore, it will be more advantageous for expats looking to move to the Netherlands to bring forward their employment to before the end of 2024, if possible.
Requesting a provisional assessment on time
If you expect to pay tax for the 2023/2024 tax year, you can save money on tax interest by requesting a provisional assessment in time. You will have to request the provisional assessment six months after the end of the calendar year (July 1, 2023). Following the end of the calendar year, expats will pay a minimum interest of at least 7 percent. To ensure that the assessment is raised in time, we recommend that you request it before April 1, 2024. The assessment for the 2023 tax year must be paid at once. You can pay the 2024 tax year assessment in instalments, however.
Bundle deductible expenses into one year
If possible, bundle deductible expenses such as medical expenses and donations in one specific year. A deduction is consequently achieved earlier, as the threshold is only deducted once from the expenses. For donations, the threshold disappears completely if you commit the donation to a non-profit organisation for five years.
While tax matters can be complicated, expats should leverage professional help where possible to ensure they maximise their tax benefits. It is also essential for expats to remain aware of double taxation treaties so that they are not taxed twice.
This article was supplied by J.C. Suurmond & zn., a Dutch company specialising in expat tax matters. If you have any questions or need assistance managing your tax matters in the Netherlands, get in touch.
