Double taxation relief sounds like a relief of double tax, but is it? This article is about income tax. Not a well chosen name.
Double taxation relief
Double taxation implies two countries like to tax one and the same income source. Being taxed twice is undesirable, hence double taxation rules have been invented.
The first step is to look in the tax treaties which country can tax what. The Netherlands has with the majority of the countries in the world a double taxation treaty. In the treaty determines which country may tax what. And exactly the word May is the problem.
Property. Property is clear, the country where the property is a burden on the soil can tax the income. But is it clear? The word used again is May. The problem is that the Netherlands do not tax capital gains. If you sell your Dutch property with a profit, we do not tax the property. We see happening more often that the United Kingdom, Australia, Italy, Austria all claim to tax this gain, as the Netherlands did not. Based on the word May.
Double taxation relief calculation
The double taxation relief calculation is rubbish. The double taxation relief is about double tax, not social premiums. The tax rates of 2020 are 37,35% over the first EUR 68.508. And 49,50% over the excess.
The first 37,35% tax bracket is including social premiums. From zero to EUR 20.711 the rate is 27,65% social premiums and 9,7% tax. Combined 37,35%.
The foreign income is taxed in the top of the tax brackets. The double taxation relief is taken out of the average of the tax rates. The income is taxed at 49,5%. The double taxation relief is based on an average of 9,7% tax plus 37,35% tax and 49,5% tax. The tax relief can never match the tax due.
We think a lousy relief.
What is income ?
Dutch tax residents from abroad contact us as they are concerned. Concerned about foreign income being taxed in the Netherlands. Foreign income such as:
– rental income from foreign property or
– interest income or
– capital gains from investments.
The Dutch tax system thinks rental income is not an income, interest income is not an income and capital gains is not an income. The Dutch wealth tax calculation is interesting and complex to explain. A calculation based on assumptions. Actual income is disregarded.
A tax advisor paradise.
We think tax-is-exciting, taxed twice is not. Our core business is assisting non native Dutch with their tax affairs. Determining where a person is a tax resident, which tax treaty applies, what is income and how to correctly process this in the income tax return is what we do.
We charge for a personal income tax return EUR 390 incl VAT including tax partner. For an entrepreneur we charge EUR 550 ex VAT including tax partner. Feel free to contact us.