Capital gain selling your home – tax free with conditions

Capital gain selling your home – tax free with conditions

These days it is common to make a capital gain selling your home. One of the upsides of the Dutch tax system: no capital gain tax. But there are conditions.

Capital gain selling your home

Selling your home is a fortunate event these days, purchasing a home is a nightmare. Both are very much in balance. The fortunate part: the asking price is being overbid. The nightmare part: you need to overbid the asking price in order to be able to purchase.

At our home we have the best constructor for setting the tiles. He told me he sold his house with the same profit he had to overbid the house he purchased. Basically he has a bigger house for the same monthly costs.

Capital gain selling your home – tax free with conditions

No capital gain tax?

Indeed, in the Netherlands there is no capital gain tax for private individuals. That is also the reason why nearly no company purchases a home. A company selling such a home is subject to capital gain tax. In some countries there is a tax advantage to purchase property in a vehicle, not in the Netherlands.

That said, in this housing market where the employee cannot afford the purchase of the house, the employer helps. We now see employers actually purchasing a property in the name of the company to house the employee. The advantage for the employee is that the rent being charged by the employer cannot exceed 18% of the annual salary. Free tax advising bonus material!

What are the conditions?

The Dutch Government learned from their mistakes. In the past there were no conditions, so you had your house financed for 100%. Actually 120%, as in those days you could finance also the purchase costs.

You sold the house, made a gain, purchased the Porsche with the gain and financed the next house for the full amount again.

Now there are rules. The rule is that you need to invest the gain made in your next house, that is your main residence. The penalty for not doing so, is that you cannot deduct the mortgage interest for the part of the mortgage you took out too much.

Example

You purchased for EUR 350.000 your home 10 years ago, 100% financed. Paid back on this loan EUR 120.000, hence today the loan on the house is EUR 230.000.

The house is sold for EUR 550.000 and you purchased the next house for EUR 650.000. You took out a EUR 650.000 loan for the next house.

The capital gain is EUR 550.000 minus EUR 230.000 remainder loan is EUR 320.000. That implies that for the next house costing EUR 650.000, you can only take out a tax deductible loan of EUR 650.000 minus EUR 320.000 gain is EUR 330.000.

In your tax return EUR 330.000 loan for the house is tax deductible and EUR 320.000 is not.

Fine tuning

The above example is a rough example. Some non-deductible costs influence the capital gain in a lower amount. Plus most people want a new bathroom and kitchen in the next home, these refurbishments are taken from the capital gain amount if no loan was taken out for these costs.

You need a professional mortgage advisor, as you can find with expat mortgages. During the intake they explain you how the possible gain of your current home is taken into account in the finance report of the house you would like to purchase.

It is good or bad, this condition?

It depends who you ask. My experience is that the man is eager to purchase the Porsche while the woman is more relaxed with less mortgage debt. I can related to both the man and the woman. The Porsche as you do not know how long your life will last, not sure if a fast car influences this period. On the other hand, if economics get worse, a low debt is handy.

Tax is exciting

We think tax is exciting. Accurately calculating the capital gain to be invested in the next home is what our team get excited about. This is a service that is part of the tax return filing service.

US tax return requires a Dutch tax return!

US tax return requires a Dutch tax return!

US tax return requires a Dutch tax return, that is the sequence of events if you need to file a US income tax return. We can assist.

US tax return requires a Dutch tax return

A US national or US green card holders needs to file a US tax return. Even if you have never lived in the USA, or only had income outside the USA. The price of being a US national is that you need to file a US income tax return. Even if you live on the moon.

Dutch tax resident and US tax return

The moment you are a Dutch tax resident. Or you have become a Dutch tax resident as you arrived in 2021, or left the Netherlands. In order to be able to file a US tax return, you first need to have filed the Dutch income tax return.

The Dutch income tax return is the base of the US income tax return.

US tax return requires a Dutch tax return!

Only Dutch income – US tax to be paid?

In the situation you only have Dutch income, it is possible that you are to pay US income tax. There are tax credits in the US. If you would like to meet the experts in the Netherlands to assist you filing your US income tax return we recommend you to connect to BNC Tax. BNC tax is a Dutch resident company that is specialized in filing US income tax return.

US tax deadline

The US tax deadline. In general the deadline is April 15 for filing the federal income tax return each year. That date is not carved in stone. The deadline moves to the next business day when April 15 falls on a Saturday, a Sunday, or a legal holiday, and other national events can shift it as well.

How can we help you?

We have the capacity to assist you filing your Dutch income tax return before April 15. That said, we can do miracles, but only so much. You cannot arrive with us a few days before April 15 expecting we can make your deadline.

The Dutch situation is right now (February 17) that all overviews you need are available. Your employer provided your income statement. If not, your last salary spec could do the trick. The bank provided their overviews, please log on and check. Insurance companies issued overviews you might need. No reason not to contact us now already.

The regular income tax return is charged at EUR 390 incl VAT including tax partner.

Tax is exciting

We think tax is exciting. Excited we are already to file your income tax return now!

Get married!

Get married!

Get married! You might think what this has to do with tax. A lot, but marriage goes beyond taxation. Hence we encourage the marriage.

Get married! Why would you get  married and to whom?

We are compliance tax advisors, that implies we process the tax returns. The income tax return is one of them. We process a lot of income tax returns during the year. In those returns we see young people purchasing a house together.

The action of purchasing a house together to make that your main residence has a tax consequence. The tax consequence is that you have become tax partners. The tax partners is an important aspect of the income tax return. That said, this status does not only apply in the income tax return, but also in the inheritance return and other tax aspects.

Becoming tax partners – not actually aware of

The young couples that become tax partners due to the purchase of the house are not really aware of that fact. It is something to read up about, we would like to suggest. Not too much, we think tax is exciting, you might think it is confusing. And you are right.

Get married!

Why get married?

The only person that does not die among us is Sinterklaas, everybody else one day die. That is a fact, the unknown is when. If you they purchased with your partner a house together, it is possible one of you dies.

The family who inherits 50% of the house is aware of the booming housing market. And they did not like the friend of their family member with whom the house was purchased anyway. So the family might start actions to kick the other person out, as they want to sell their inherited part of the property.

To prevent this, or to legally get everything into line, the partnership should be made more legal. For that we have two options. One is the registered partnership via the notary. The other one is the old fashioned marriage. Both solutions have the same result. If the one person dies, the other person inherits. You do not need to rule over your death, but you can arrange to leaving others behind with less issues.

Marriage over registered partnership?

Everybody can do as they like, but being married has advantages over registered partnership. Especially international. As this article is addressed to internationals. Even though the Netherlands is a beautiful place to stay, you might not stay here forever. Then exporting your legal commitment in a marriage is more easy than a registered partnership.

The notary

We are not a marriage consultants, nor a notary. So to get the best advice in this field is to contact a notary. The best notary we know in this field is Bert Buma of the Buma Algera notary office.

Tax is exciting

We think tax is exciting. You might not look forward to a marriage and the obligatory party where your in-laws are also invited. That is not the point of this article. The point is to give the legal commitment between you two a thought and maybe formalize it better than it is now.

Entrepreneurs health care insurance – what is that?

The entrepreneur health care insurance, collected by the Dutch tax office. Does that imply I no longer need to take out one myself?

Entrepreneurs health care insurance

In the Netherlands all residents need to have a health care insurance. Often this is a Dutch health care insurance. However, if you are for some reason socially insured in another EU country. You show the so called A1 statement to the Dutch SVB. The SVB is this institute that is in charge of the collection of the social premiums. Then you do not need to have a Dutch health care insurance.

If you lack to take out a health care insurance, then the CAK will send you a letter. The CAK is the administrative office of the SVB. This letter demands you to take out a health care insurance within three months of the date of that letter.

Health care insurance fine

The moment you do not obey the demand of the CAK, the justice department via their administrative office the CJIB will send you a EUR 437,25 penalty. And another one the next month.

The third month you will not get a penalty, but the CAK then assigned a health care insurance to you.

Dentist could be coverted by the health care insurance

How is the health care premium paid?

The health care premium is in fact charged to you two times per month. One you are in charge of, the other one you are not aware of.

The one you are in charge of is the one you took out yourself. For instance if you are a single man or an older couple we can only assume you do not need the services related to pregnancy. So you chose an insurance without these facilities. In other words, this health care insurance you can customize.

The unaware premium is paid by your employer or your pension organization. Your employer pays directly to the Dutch tax office the monthly amount related to your salary. In the old days this was shown on the salary specification. The amounts are now so high, to keep the peasants unaware, it is no longer shown.

Entrepreneurs health care insurance

The entrepreneur has no employer. Still the entrepreneur also needs to pay for the health care insurance two times.

The one time is identical to the situation of an employee, the entrepreneur takes out a health care insurance him or herself.

The second payment is made via the income tax return. The entrepreneurs income tax return always show two amounts to be paid. One amount is the income tax, the other amount is the obligatory health care insurance.

The most common response we receive from entrepreneurs is surprise. Instantly the idea grows that if the tax office charges them already with health care insurance, they can cancel their own paid health care insurance. Then we need to explain that this is not possible. Confusion all over the place.

Tax is exciting

We think tax is exciting. Paying for the health care insurance is an obligation. We understand that entrepreneurs are confused that their tax bill also includes health care premium to be paid to the Dutch tax office.

Incorrect tax form filed before deadline? – Fine?

A company is a source of income

There are different tax forms to file your annual income tax return with in the Netherlands, what if you file the wrong from? Will you get a penalty?

The incorrect tax form filed – what flavours do we have?

There is a limited number of tax returns tha can be filed in the Netherlands. The most common one is the P(rivate)-form. The tax resident is an employee or was an employee. The W (profit) tax return if the tax resident is an entrepreneur like a freelancer or ZZP. The C (non resident) is for a non resident tax payer that does have a filing obligation in the Netherlands. For instance for property owned in the Netherlands. The M (Migration) form is for a person that either arrived in the Netherlands or left the Netherlands. In other words started or stopped being a Dutch tax resident.  Then we have the F (final) form if the concerning tax resident has died.

A lot to choose from, what if you made the wrong choice?

Filled the incorrect form, what now?

In the Netherlands we have the obligation to file the income tax return before May 1. And if you have not been invited to file and you are aware you need to pay Dutch tax, you are supposed to file the tax return not later than 14 days after May 1.

What if you did your tax return online ticking the incorrect box for the sort of tax return. Like you chose P instead of W or M instead of C. Have you missed the deadline? The tax office would like to think so and will impose a fine of EUR 385 (2021). The court disagreed.

Court case

A former Dutch tax payer moved to Israel. She was asked to file for the year 2017 the  migration income tax return (M form). She was reminded on April 30, 2019. As a result she filed early May 2019 a non-resident income tax return (C form). That is not the correct form. She was reminded again in November 2019. As she had the opinion to have filed the tax return, she did not respond anymore.

The tax office imposed the EUR 369 penalty for not filing in time the income tax return. The lady made a complaint and asked for reimbursement of costs made related to the complaint. The penalty was deleted, but the compensation not granted.

Incorrect tax form filed before deadline? – Fine?

The lady went to the higher court to complain for not getting a compensation. The tax office argued that the tax return was send to the lady to her Israeli address. The tax office could not substantiate to the court if that was in fact the migration income tax return.

The reminders did not show which tax return was supposed to have been filed. The reminders are general reminders, not specific to what is actually expected to be filed.

The court could not rule any different that the lady filed in time a tax return. That implies no penalty for not filing in time could have been issued. The fact that the tax office does not communicate in their reminders what exactly it is the tax office would like you to do, is the risk of the tax office. No penalty for the lady and she is entitled to compensation of costs made.

Tax is exciting

We think tax is exciting. We are excited about this court verdict. Indeed, the tax office sends a random reminder. If the reminded person contacts with us, we need to find out via calls what it is the tax office expects. Even then we something are informed incorrectly about the type of tax return that is expected.

That said, if you know that the Migration income tax return (M form) cannot be done online and the non-resident tax return (C form) can be done online. We understand the lady of the court case did the best she could within the limitations of possibilities. Maybe she could have emailed us to assist her with the reminders, that would have been exciting!

My name is Kelly and I am excited to file your correct tax return to prevent a penalty.

No penalty

Family loan

family loan

The family loan is a possibility in Dutch rules and regulations. Could this be more favourable?

Family loan

A loan is a loan, whether between you and a bank or you and your family. A loan is an:

– agreement to loan an amount,
– for which interest is charged and
– a repayment schedule is in place. If one of these criteria is missing, it is not a loan, but for instance capital.

Interest

A normal interest percentage needs to be set. What is normal depends on what interest percentage a bank would have charged under the same conditions. The problem in this case is that often the family is taken out, as the bank is not willing to loan, let alone provide an offer with an interest percentage.

The court has ruled that family do not need to make the same profit as a commercial bank. That implies the normal interest can be to a lower percentage.

The interest can also be a higher rate. The tax office will then investigate what is the reason for this higher interest. A reason could be that no collateral is provided.

The interest of a loan taken out for the purchase of a home is only tax deductible, if the repayment period of the loan does not exceed 30 years.

Family loan

Court case

In 2018 a family loaned against 9% interest for a house. The tax office argued that the 9% was too high. The correct interest percentage was 4,5%. The tax office won this case.

The nasty aspect of this case was not addressed by the court, but later by the minister of finance. The 9% interest was part of an annuity that would pay back the full amount in 30 years time. By dismissing the 9% as too high, the correct percentage was now 4,5%.

You would imagine that less interest implies more repayment. That is not the case. 4,5% interest was dismissed from the annuity and the result was that not enough was paid back over a 30 year period to repay the full loan. The consequence of this lower interest verdict is no only less interest deductible. The consequence can be that no interest is deductible at all, as the loan no longer meets the 30 year repayment condition.

The solution in such agreements is to put in a condition that if the interest percentage is not accepted by the tax office, the balance between the accepted interest and agreed upon interest is to regarded an additional repayment of the loan.

Why a family loan?

Doing business with your family is only fuel for the traditional family fights. Then again, if the bank keeps on reducing the amount you can keep in your bank account penalty free. The stock exchange might be at the top already. Slick investment sellers are a risk on their own. Why not leant your family?

To avoid unnecessary risks of not being repaid, a mortgage can be put on the house by you. Then there is nearly no risk for you.

Tax is exciting

We think tax is exciting. Loaning money is not our business. Taking into account in the tax return the interest deduction (box 1) or the loan receivable (box 3) is our business. Hence we touched the subject of a family loan. It is possible, at slightly better conditions than a bank offers. Do not get too creative, as the tax office is on the lookout for too generous loans or strange conditions.

Divorce and the main residence – How does it work tax wise?

A company is a source of income

Tax is exciting, a divorce is not. Lawyers, formalities and trying to cope with each other consumes all your energy. The tax consequences of a divorce are then the least of your worries.  These do need attention as well.

Divorce and the main residence – mortgage deduction

The rule is that a tax resident can deduct the costs related to the loan taken out to purchase the home. From his or her taxable income. A condition is that you need to be living in the house.

Divorce and the main residence

Divorce and main residence – after divorce period

Then the moment comes that the divorce is final. The two partners are officially no longer connected by marriage. That never happens on December 31 or January 1. That implies that during the calendar year part of the year both were married, at least one was living in the house. Part of the year you were not married, hence not fiscal partners. However, the house was still a cost. Who can deduct what?

In this year of divorce the law created the opportunity to choose to remain tax partners for the full calendar year. Even though the conditions for being tax partners no longer apply. One of the conditions is that both partners need to be registered at the same address with city hall. Very unlikely under these conditions. By choosing in the income tax return to remain tax partners, the mortgage costs can be deducted in either tax return by choice.

Divorce and voluntary fiscal partnership

The above mentioned choice to remain fiscal partners during the remainder of the calendar year after divorce solves a practical issue. Often one of the partners actually is able to pay for the mortgage of the house. If that partner pays 100% and can only deduct 50% due to the fact there is no more fiscal partnership. The divorce not only hurts feelings, but also the tax deductions. Hence this solution.

Court case – chosen NOT to use the voluntary fiscal partnership

A couple had a divorce. Basically the wife was so fed up with the whole situation that he could have the house. She owned 50%. The condition is that she is no longer on the mortgage obligation. That was agreed upon in the divorce deed. The notary transferred the mortgage from her name after the divorce became final. The husband settled with the mortgage bank the transfer. Naturally the mortgage bank issued a penalty for this change in conditions of EUR 34.617.

The former wife and husband did not claim in the income tax return to continue for that calendar year their fiscal partnership after the divorce was final. He deducted his part of the interest and the full EUR 34.617 penalty. The tax office disagreed and stated he could only deduct 50% of the costs and penalty, as he had not opted for fiscal partnership after the divorce.

Court case verdict

The court ruled that the divorce agreement stated the transfer of ownership. That the notary has effected that after the divorce. The mortgage rearrangement was done after the divorce. Hence none of what was being deducted was part of the married period. Hence the choice of being or not being tax partners did not affect the costs deducted and the EUR 34.617 penalty deducted. The deduction remained in place and the tax office lost.

Tax is exciting

We think tax is exciting. We experience often that certain aspects of a divorce are mistreated. Pension rights, nearly always waived by the wife, are misunderstood. Lawyers label goods devided between each other as gifts. Nonsense. The tax office? The tax office is eager to deny deductions, if not addressed properly in the divorce agreement.

To both partners in divorce, pay attention to the tax part. If the tax matters are taken into consideration, you can truly address the divorce upon signing as a job well done.

Window dressing and the bank

income tax

Window dressing, what is that about? That is about dressing up your annual report.

Window dressing

Window dressing is something shops will recognize. It is all about making your product so attractive, a potential client needs to come into your shop. That is the first step to persuading that potential client to become a true client.

The official translation is ‘making it more attractive than it actually is’. Or ‘fake it till you make it’.

Bank loans

Having a company and getting a loan is always a hassle. The annual report and income tax returns over the past few years are examined by a banker. A banker is not a tax expert, hence you get sometimes questions about a tax return, while the tax office already agreed with the tax returns.

The question of questions you do not want to get is: why has the company negative equity?

What is company equity?

A company has at the end of the year a balance. To get it to balance, the entrepreneurs equity in the company is used for that purpose.

Example, the company has only a EUR 10.000 bank account. That is on the debit side. Hence on the credit side is EUR 10.000 equity entrepreneur. Credit side is the good side in this perspective.

But if you had EUR 10.000 in the bank, you paid EUR 8.000 creditors, so you have EUR 2.000 in the bank, but still EUR 4.000 creditors to  pay. Then the equity of the entrepreneur is EUR 2000 on the debit side. To balance it out. But that is negative equity, as the company equity should be on the credit side.

Window dressing and the bank

Is negative equity a problem?

It depends who you ask.

If you ask the entrepreneur, of course not. The entrepreneur knows he or she can soon invoice the clients. Money coming in, to pay creditors, but also to pay rent and groceries.

If you ask the bank, it is a problem. Negative equity is a no for a loan. For us that is a bit strange, as this is only a mathematical approach. Not the approach of the actual company process. But then again, a bank needs to draw a line and the line is negative equity.

How to avoid negative equity?

The one moment both the bank and the tax office take into consideration is January 1. If you are aware of this date, you can work with this date.

For instance, the Dutch tax office accepts that you bring in money in the company from private bank accounts. This helps your company equity wise, but at the same time you avoid paying Box 3 wealth tax in the income tax return. As the tax office does not want you to misuse this possibility, the amount you can bring in is maxed at about EUR 40.000. Depending on the company situation.

The court, on the other hand, accepted EUR 150.000 brought in by a lawyer. Hence it depends on the purpose and the arguments you bring to the table. Lawyers are good at that.

The more you can transfer from your private account to the business account, the better it is for the equity of the company.

Strategic administration

The moment you see January 1 approaching, you remind your outstanding debtors. The more they pay, the more is in the bank. As debtors and the bank balance are on the same side of the balance, you would think that does not make a difference. Still it does.

The bank also makes ratio calculations where the debts are set off against receivables. Then it helps that with the money collected from the debtors, you were able to settle some creditors. Good for ratio calculations made by the bank.

When to start with paying attention to the content of your annual overview?

Instantly of course, but we do understand not everybody is excited about tax and accounting. A loan we have in mind with this article, is one to purchase a home. A home purchase is not like purchasing a Mars bar, you actually give it some thoughts. Maybe well ahead of the actual purchase. That is the moment.

The moment needs to be at least three years before you need to documentation in order, as the bank will request for the last three years.

Do not fake it, make it

Even better than window dressing is simply make it happen. If you are aware you want to purchase a home. And you see how expensive matters are on the housing market. Use the max of your ability to make your company a success. The home purchase is your drive. Drive can bring your more than you ever could expect. Overdrive, a burn out or similar issues, brings you nothing. So have your personal balance also up to date!

Tax is exciting

We think tax is exciting. Discussing an annual report with the bank is never exciting. More frightening, and they know! The bank knows you want that loan, so it is also part of a play. Play it well, organize matters before you start the adventure.

Complaint made against tax law

A complaint made against tax law is what we read in the news. We have even been contacted to assist in such a complaint. If we can provide content. We cannot.

Complaint made against tax law

A complaint made against tax law could be seen as a complaint made against the maximum speed a car can drive on the road. It is useless.

Louis the 14th thought of himself as King and God and he drained the French people for his own pleasure. In 1789 the French revolution took place where the French Kingdom ended under the Guillotine. In 1791 the new law was introduced based on the thoughts of Montesquieu.

Charles Montesquieu concluded that in a civil stated the power of created rules, executing rules and judging rules should be disconnected from each other. Trias poitica.

The Dutch Government is in charge of creating the law, like the Box 3 wealth tax. Making a complaint in court against Box 3 law conflicts with the Trias Politica. A court cannot judge the law. Hence I think making a complaint against the Dutch tax system in court is useless.

Court case – house doctor pays too much tax

A regular house doctor has to pay EUR 51.485 Box 3 taxation in his 2016 income tax return. As he very much disagreed with the amount of tax, he simply did not file the 2016 income tax return. The banks already provided the tax office with the bank balance, as they do. So the Dutch tax office imposed a EUR 51.485 tax assessment based on EUR 4.314.884 savings account. Including EUR 369 penalty for filing the tax return too late.

The doctor made a complaint to the tax office based on ‘when is enough, enough?’. And he claimed that the taxation eroded his savings account. An unreasonable amount of tax was claimed.

The tax office denied the complaint. The doctor went to court and also the court did not agree with the amount of tax over his savings being extreme.

Government budget

Above we addressed the legal system that applies in the Netherlands, on basis of which you cannot ask a court about the law being valid. The other reason is the budget.

The Dutch Government basically has a household book with expenditures. Based on those the tax rules are being created. For instance the Value Added Tax rate went up from 17,5% to 21%. The European Union desires one uniform rate of 27% Value Added Tax.

The income tax rates are there so support the household costs of the Netherlands. The elections over the years show that the voters find that income from labour should be taxed less. You work hard and with 52% tax (was in very old days 72% tax) it felt like most is taxed. Hence the taxation on labour is reduce to below 50%.

When less tax is levied on work, more tax is levied on other aspects, to balance the books. The choice was Box 3 wealth tax. In a socialistic country as the Netherlands that is the more logic choice. Those who have more, can help the ones that have less. The court case above shows exactly this situation. The house doctor has EUR 4,3 mln in the bank and complaints about taxation. This tax can help others who are less fortunate.

Steady base

Another reason why I think you cannot appeal the Dutch Box 3 wealth tax rules is the steady base the Netherlands provides. The house doctor in the example, could he maintain the EUR 4,3 mln savings account in a third world country bank? Maybe yes, maybe no. Could be less secure. And the security the Netherlands provides, could that have resulted in the first place the house doctor was able to get to the EUR 4,3 mln?

When the world wide tax systems are compared to the state the countries are in, the infrastructure, the business environment, we think that is related.

Tax is exciting

We think tax is exciting. Some are less excited about paying tax. Some are excited about paying tax, as they state: I must have made some money. We are eager to assist you with filing your income tax return. Based on the above article it does not imply we will not claim all credits. Then again, if you are to pay tax in the end, that is part of the game.

Tax complaint and appeal – how does this work?

A company is a source of income

You disagree with the tax office decision and you want to learn more about tax complaint and appeal. In this article we like to update you.

Tax complaint and appeal

In the Netherlands we offer the possibility to disagree with a Government decision imposed on you. This also applies in the tax system. Actually, Dutch argue often a tax assessment. That is not the same as Dutch winning often the argument.

Tax complaint and appeal – sequence

The sequence of events is as follows. You receive an assessment that you disagree with. From the date of that assessment you have maximum 6 weeks to argue this decision in a complaint.

The complaint is send to the address shown in the assessment where you can send complaints. Or, should this not be stated, send the complaint to the address from which it has been received.

Tax office response

The tax office needs to respond in a reasonable period of time. About 8 weeks. Often the tax office needs more time and then they send you a letter in which they ask for more time. A bit of a silly letter, because if you disagree, they respond more rapid implying they deny your request.

Officially the rule is that another person in the tax office that is appointed as complaint manager, is to respond to your complaint. This to avoid the person sending you the first assessment, responding to your complaint. That is the official rule, but on tiny departments of the tax office like the 30% ruling, this is not the case. The person who denied the ruling, also denies the complaint.

Therefore it is important to be able to go to an institute not being the tax office: the court

Tax complaint and appael

Tax complaint and appeal: court cases

You received an assessment, you made a complaint against the assessment again with the tax office. The tax office often has one clear line of arguments. This implies, the complaint is denied as well. Unless ofcourse there was a mistake made or aspects not clearly indicated in the tax return.

The response of the Dutch tax office on your complaint can be appealed in court. Again, you have six weeks time from the date of the decision to appeal. How to appeal with court is explicitly stated in rules and regulations. Such an appeal can be done by yourself, by us and or by a lawyer. A lawyer is not a requirement, nor a must. The court prefers you to represent yourself we experienced, maybe with the assistance of a tax advisor.

The court (Hof) is experienced in tax and can provide you with the answer like you expect from the court. An independent answer. Still, the answer can imply your complaint is being denied. What is the next step?

Tax complaint and appeal: high court

You received an assessment, filed an complaint against the assessment. You went to court to appeal the complaint outcome. The court’s decision you also disagree with, can you appeal this court decision? Yes and no.

Yes, you can go to the high court (Hoge Raad). However, the high court will not look at the facts and circumstances. The high court will only check if the legal procedure were correctly followed and if the response of the court is in line with jurisprudence.

This implies if you have new arguments, new evidence, you cannot appeal the case with the high court. All information you should have provided in the court case. That is the crucial thing of the court case, it is now or never argument and evident wise.

Tax is exciting

We think tax is exciting. Receiving a conflicting tax assessment is not exciting.

In our practice sometimes we have to file an complaint as well. Like we had the other day with the 30% ruling department. The 30% ruling application had not been received it was stated. We filed an complaint, and the one person who is the ultimate person responsible of this department also handled the complaint. The outcome could be predicted. Hence we were eager to go to court, but the client had no interest in a court case. We still think that is a true pity.

Ever heard of a letter addressed to the tax office that did not arrive? We bet that even if you put BELASTINGDIENST on a white letter without stamps and without return address, it will arrive. So we still feel sorry we could not appeal. That said, if you go an make an complaint or appeal, only use registered mail. This prevent the tax office to simply dismiss your case by stating the complaint was never received.

Rejected annual income tax return

income tax

You filed your annual income tax return, as the tax office asked you to. Logged on to the private Digid environment on the website of the Tax Authority. You have carefully checked the information already filled in. Some information you added and it was ready to be send off to the Tax Authority. You have done above. Now you received a reply from the Tax Authority: a rejected annual income tax return. I can hear you thinking, why is this, if I have done what has been requested.

Rejected annual income tax return

The rejected annual income tax return could be caused by filing the incorrect form. If you file an annual income tax return, you can use your private DigiD. While doing this, you are filing a regular private annual income tax return, so the P-form. There is a big chance, that the Tax Authority was expecting a M-form.

The Dutch Tax Authority has different forms to file an annual income tax return. A regular P(rivate)-form, used for people who are living in the Netherlands for a full year. A M(igration)-form, used when a person arrives or leaves the Netherlands during a year. There is also a so called C-form, for non-resident tax payers. The annual income tax return, has to be filed with the form the Tax Authority expects.

Rejected annual income tax return

Deadline income tax return

The deadline of May, 1st, 2021 for the P-form. For the M and C form the deadline of July, 1st, 2021 have passed. The Tax Authority strives to reply to filed annual income tax return within 3 months. Most of you are currently receiving letters from the Tax Authority in regard to the outcome of the 2020 annual income tax return. Often this letter states that the outcome of the filed tax return. But some of you, will receive a letter from the Tax Authority, stating that the Tax Authority has rejected your annual income tax return. The incorrect form was filed.

My name is Kelly and I am happy to assist you with a rejected tax return

Big Dutch booklet tax return

In order to correct this, you have to file your annual income tax return again, but this time, with the correct form. Attached to the rejection received from the Tax Authority, you have received a big 80+ pages booklet, fully in Dutch, which has to be filled manually. To fill in this form, manually, without understanding of the Dutch language (let alone Dutch tax language), this is something that can be described as dreadful.

Especially clients who are not invited to file their annual income tax return, skip the filing of their first year, due to the dreadful 80+ page booklet that has to be filed, meaning that they do not claim their tax refund, which is of course a shame. Most of the time, you are entitled to a refund if you migrate during a year, since your employer withholds the wage tax calculated over a full year, instead of over the period that you were subject to Dutch tax.

Tax is exciting

We think tax is exciting. We are very excited to be able to assist you with filing your M-form. The M form can be filed by us digitally and we can provide you with the information in English. Our fee for filing an annual income tax return (P-form, M-form or C-form) is EUR 390, including VAT, including your (tax) partner.

Anonymous Dutch tax rate

income tax

Anonymous Dutch tax rate must sound exciting, as you are anonymous to the Dutch tax system. Or is it the other way around, not exciting at all?

Anonymous Dutch tax rate – what is that?

If you are an employee of a Dutch company, you need to identify yourself with that employer. And you need to provide your Dutch tax number (BSN) to that employer. If you lack one, the other or both, you are as employee anonymous.

Anonymous Dutch tax rate
Anonymous Dutch tax rate

What are the consequences?

The consequence of the employee being regarded anonymous is that the 52% tax rate is applied to the salary income. Ah, you think. They simply apply the highest tax rate. No. The highest tax rate is 49,5%, this rate exceeds the highest tax rate. See it as a penalty for not complying with the rules.

Besides the ridiculous 52% tax rate, no wage tax credits can be applied. The social premiums are calculated not taking into account the maximum amount over which these premiums can be calculated.

Can the anonymous rate be solved?

Often the employee receives the first salary specification and is horrified about the low net salary. When the employer explains that is caused by the employee not identifying him or herself, often the employee instantly identifies him/herself. Does that solve the issue?

No it does not. The rules dictate that a salary that was processed as being anonymous cannot be corrected at all. This is only different if the employee provided the applicable details in time to the employer, but in the administration of the payroll these details were not provided in time or processed in time. Then the salary can be corrected.

Can the too much wage tax be reclaimed in the income tax return?

In the income tax return the salary details including the wage tax collection are taken into account. That implies the 52% collected rate is set off against the regular tax brackets. The tax credits are also taken into account.

If in the end you do not pay too much tax, as the 52% is set off in the income tax return, there is no need to address the anonymous rate issue? Of course you need to solve this issue, as the social institute will also see you as anonymous. That implies no unemployment benefit for you, when this employment is terminated. The issue is solved by providing your employer with your Dutch tax number and copy of your identification.

Tax is exciting

We think tax is exciting. Some think that being anonymous in the Dutch tax system is a good thing. Unfortunately it is not. You need to have been identified by the employer and to provide your Dutch tax number for the wage tax and social premiums correctly be applies.