Tax on Dutch property while living abroad is a topic that often runs by our office. Sometimes pleasant, the owner is on time. Sometimes less pleasant, the owner is basically very much too late and the tax office is already keen to sell. Indeed sell.
Tax on Dutch property while living abroad
The rule with property is, that property is taxed in the country where the property is actually situated. The logic behind this, is that the soil of the nation on which the property is a burden, should be able to tax the house.
That implies that if you are a Dutch tax resident, you need to report your worldwide assets including property abroad. For the property abroad you receive a double taxation relief.
The other way around is also applicable, if you live abroad and you own a Dutch property, then you need to file a Dutch nonresident income tax return in which you show the value of the house minus possible debt taken out to purchase the house and over that balance you pay the Box 3 tax rate. That is how you pay tax on Dutch property while living abroad.
You live abroad – living life and not thinking about Dutch tax
We have seen it happen many times. You owned the house you purchased. Chance to work abroad arose, you left, rented out the place and have an agency in charge over this. You see the money coming in and think all is well.
Sequence of events:
The Dutch tax office invites you to file – you completely miss this invitation
The Dutch tax office reminds you to file – you completely miss this reminder
The Dutch tax office reminds you again to prevent a penalty – you completely miss this penalty saver
The Dutch tax office issues an ex officio assessment based on WOZ value only – you miss this one also
The tax office starts to put collecting fees on this assessment and starts the same procedure with the next year.
Letters become uglier by the day and for some reason the collector does know how to reach you at your present address abroad with the total sum of let us say EUR 85.000 in tax due over 5 years time.
You are far away, so you feel like you are not in harm’s way yet, until the moment the tax office informs you that they have the power to sell your house. Maybe your initial though is “the market is good, have them sell my house”. That is not how it works. The tax office needs EUR 85.000. Your house can have a EUR 850.000 WOZ value, but if someone offers on the auction EUR 85.000 for the house, the tax office will accept, as that is the debt that needs to be settled. You end up with no house, no more tax debt, but you do have issues with your mortgage provider. You do have a mortgage on your house, but tax debts overrule the mortgage debt.
Of course the tax office will do thorough investigation about your whereabouts to get you to respond to the outstanding debts, as this auction sale is a paper trail they like to avoid as well.
To be honest, the tax office dislikes this case as much as you do. Both you and the tax office like to solve this, but all depends and what you communicate and how you do that.
What do you need to do?
Doing nothing is not an option, so you need to contact us. The sooner the better, as we can only go back 5 years with the tax return. If we need to go back 6 years, we fully depend on the period exceeding the 5 years on the mercy of the civil servant.
What will we do for you?
We first disclose that we charge EUR 390 per tax year which is a calendar year for the income tax return. Then we collect information with you. Information about the housing being rented or not. If yes, what is the collected amount of rent. Possible mortgage debt on the house.
With that information we file a tax return and it can happen that you have tenants and a mortgage on the house, resulting in no income tax due at all. Only hour fee.
Of course that is not the end of the story, we file after we processed the tax returns a complaint with the tax office against the ex officio assessments. How that process goes depends on the information at hand and the experience of the civil servant working with the Dutch office. This time spend is outside the EUR 390 per tax return.
In the end we can solve a lot.
What is not possible to solve?
The EUR 369 penalty for being too late. Too late is too late, we cannot change that.
The collecting fees of the debt that you are not due in the end.
Tax is exciting
The exciting part is that should you have us file your tax returns for those years, no income tax might have been due. The sooner you ask us, the less trouble you have. Then you might start thinking with more excitement about the Dutch tax system as well.
That said, if you come to us knowing you have been behaving badly and you need it solved urgently. Getting you in (tax) line is something we are always excited about.