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

Income tax return – what types

income tax

The income tax return, what types are there you might wonder, what are my obligations, what costs can I deduct?

Types of income tax return

We have the regular income tax return (P), the entrepreneurs income tax return (W), the non resident income tax return (C) and the migration income tax return (M). We also have the F tax return, F stands for finished or deceased.

What return you need to file is set ready by the Dutch tax office. If you have registered a company your P form will be denied, as that should have been a W form. The same when you migrated, then you need to file a M form and your P or W form will be denied.

What are my obligations?

One of your obligations is to file an income tax return if one has been issued to you. Some people request for the 86 page in solemnly Dutch printed tax blabla Migration income tax return. If issued to you, you need to file, even if you regret your invitation, as the outcome is for instance zero.

Income tax return
Income tax return

The penalty for not filing in time is EUR 369. Before that penalty is issued to you, you will be reminded a number of times.

Should you not have been invited to file, then you are obliged to file a tax return yourself not later than 2 weeks after the official deadline of May 1 if you know you are to pay income tax. You know that you are to pay income tax if you had a labour income source not being employment or self-employed. An in between kind of income.  You are to file an income tax return if your worldwide assets exceed the threshold amount of EUR 100.000 (2021).

We understand you might be an international that does not know the rules. Most Dutch do not know the rules, but you are ought to know the rules. Hence this obligations can be put on you.

What can I deduct?

Not a lot, simple as that.

Mortgage deduction

We have a mortgage deduction, which implies you can deduct the costs of the loan taken out to purchase the house that is your main residence.

Study cost deduction

We have a study cost deduction, which implies that you can deduct study costs made for an improvement of your economic situation. The costs need to have been made during your stay in the Netherlands and paid by you, not being compensated by an employer to you. The repayment of a study loan is not a deduction. It is about the actual study. This study cost deduction terminates as per December 31, 2021.

Charity donation

Charity donations made to a charity organization recognized as such by the Dutch tax office.  The threshold is 1% of the combined income as minimum and 10% as maximum. No minimum threshold if the donation is done by notary deed for at least a five year period.

Pension payments

Pension payments, in Dutch lijfrente, could be deductible. However, if your employer already has a pension arrangement with you, you cannot deduct for the value that pension has increased. That value is translated in a so called A value. That A value determines what or if you can deduct any of your private made pension payments.

Alimony costs

Alimony costs to your ex-partner based on court agreement. Condition is that you can provide details of your ex partners such:

  • as tax number and or
  • address details,
    as the alimony deducted on your side is taxed on your ex partners’ side. Alimony paid for children is never deductible, as children always cost money, separated or not.

Tax is exciting

Tax is exciting and we get excited about filing your tax return. You might not share our excitement about filing a tax return, but we try to make the process more pleasant for you by using fixed fees. We have a fixed fee for the regular (P), migration (M) and non-resident (C) tax return of EUR 390 incl VAT including possible tax partner (2021 rate) and EUR 550 plus VAT for the entrepreneurs income tax return (W) (2021 rate). Feel excited to contact us!

2019 income tax return

2019 income tax return – exciting times! We are so excited we might be able to assist you again claiming back some tax.

2019 income tax return – who needs to file?

The Dutch tax residents that requested a refund for the house obviously need to file the 2019 income tax return. If you do not, you need to pay back the refund.

The Dutch tax residents that only have had 1 employer in 2019, no house, no assets, most likely are not invited to file and if they do file, the outcome of the tax return will be nil.

If you had two or more employer in 2019, most likely the Dutch tax office invites you to file to see if enough tax was withheld.

The Dutch tax residents that have assets exceeding EUR 30.360 a person and EUR 60.720 for  a tax couple, are to file the Dutch income tax return and need to report the WORLD WIDE assets.

However, if you have the so called 30% ruling no assets need to be reported. That said, if you use the tax return the Dutch tax office set ready for you, the Dutch tax office automatically chose for you that you DO NEED to report your worldwide assets. So better not to use that possibility if you have the 30%  ruling.

2019 income tax return
2019 income tax return

The Dutch tax residents that are registered as entrepreneurs with the Chamber of Commerce need to file a profit tax return.

The persons that arrived or left the Netherlands need to file a migration tax return. That said, those who are entitled to a refund are often not invited to file, best is to ask us to check if you can have money back (no charge). If you then can have a refund exceeding our fee of EUR 390 incl VAT, we recommend you to file.

2019 income tax return – what are our fees?

Our fees for the regular income tax return are EUR 390 incl VAT including your tax partner.

Our fees for the migration tax return are EUR 390 incl VAT including your tax partner.

Our fees for the entrepreneur income tax return are EUR 550 excluding VAT including your tax partner. We do assume either we already processed your administration or you provide a balance and profit and loss overview.

2019 income tax return – why use our paid service?

Indeed the Dutch tax office has set ready your 2019 Dutch tax return for free. You only need to push yes to file. The small print does state that you do need to check if what is included in the tax return is indeed correct. That the tax office does not take responsibility and if the income tax return turns out to be incorrect, penalties will be issued to you.

How wrong can they be? If you have a simple life with your family, employment and no assets, you can accept this tax return. Our clients have no simple life, they are internationals with at least bank accounts abroad, often property abroad,  the Dutch tax office has not included in the income tax return. The penalty of not reporting the world wide assets correctly is 300% of the tax due.

Then again, most of our clients have the so called 30% ruling and that is not covered by the tax return set ready of the Dutch tax office.

Despite our claim we actually think about your tax return, we offer you a human being (us, excited tax advisors) to whom you can ask about, protest against, share your tax issues. We process a lot of tax returns and there is hardly any message that does not contains a question. Our core business is of course ‘I have a short question’ afraid we start the hourly rate. But short questions are part of the deal.

Then after the tax return is filed the tax office sends assessments which we are happy to receive and examine. Or the tax office sends an inquiring letter which we will be excited to process. Or the tax office denies you a tax aspect, which we will be glad to appeal.

Orange Tax – Tax is exciting!

We do think tax is exciting and we can hardly wait to start processing your income tax returns.

In order to be able to complete your 2019 personal income tax return, we would like to receive the following information:

  • Your 2019 annual  income statement from your employment;
  • If applicable your 2019 annual mortgage statement;
  • Study costs paid in 2019 exceeding the amount of € 250;
  • The 2019 preliminary refund assessment received early 2019 or the actual refund amount received from the tax office per month, if possible, but very important.
  • If you own more than € 30.360 (tax free amount) in world wide assets, please provide us with all bank balances, shares/bonds assets and real estate assets valued as per January 1, 2019. For tax partners the tax free amount totals € 60.720 instead of € 30.000. 30% ruling holders do not need to provide any of this information.

Please forward the collected information preferably in PDF per email to info@orangetax.nl or via regular mail to P.O. Box 75524, 1070 AM  Amsterdam.

We would appreciate it very much if you would give us an explicit permission from a privacy point of view that we can process your details. This needs to be done for every tax return, so if you have completed this already last year, please do again this year. This permission you can grant via this link: https://www.orangetax.com/handling-agreement/

The rule of the tax office is: if filed before April 1, you receive the (refund) assessment before July 1. The regular deadline is May 1. If you meet this deadline instead of April 1, then you are still in time but it could take about a year before you receive a response from the Dutch tax office.

Our fee for the services of the filing of the personal income tax return is € 390,00 including VAT.

Tax consequences of renting out your house

In the current housing market it can be worth keep your house in the Netherlands while you leave the Netherlands, but what are the tax consequence of renting out your house?

Owning a house in the Netherlands

If you own a house in the Netherlands often you took out a loan (mortgage) to pay for the house. The house is regarded a source of income for the Dutch tax office. Against this source of income you can deduct certain costs. The source of income is 0,75% of the WOZ value, that is added to your income.

You can deduct against this source of income the mortgage interest, the notary costs related to the mortgage, the mortgage advisor costs, the valuation of the property for obtaining a mortgage and the building survey if demanded by the mortgage provider.

A quick calculation learns you that the costs exceed the income, hence the Dutch tax office may consider the house to be a source of income, but in fact it is a deduction for you.

Tax consequences of renting out your house
Tax consequences of renting out your house

Tax consequences of renting out your house

The condition of the mortgage deduction is that you are living in that house. Hence the moment you are no longer living in the house, but renting it out, you would assume it to have become a true source of income, but not according to the Dutch tax office. The house is then no longer a source of income and will move to Box 3. That implies you can no longer deduct the mortgage interest.

The house has moved to Box 3 and in Box 3 the actual income is not taxed. That implies the rental income is not reported (and the mortgage costs not deductible). However, taxed is the value of the house minus the debt you took out to purchase the house. The value is determined by the city via the so called WOZ value. The debt is the debt with the mortgage bank.

Tax consequences of renting out your house
I have the 30% ruling – no assets to be reported  – not?

Indeed not. The exception to the 30% ruling rule that you do not need to report your worldwide assets is property situated in the Netherlands. Hence even a 30% ruling holder needs to report Dutch property.

Tax consequences of renting out your house
I have left the Netherlands – no Box 3 – not?

Indeed not. The moment you leave the Netherlands and you still own a property in the Netherlands, you have become a non-resident tax payer for that property and for that property only. So you pay Box 3 tax as described above. But if you also still have Dutch bank accounts, those you do not report as a non-resident tax payer cannot be taxed for bank balances kept on in the Netherlands.

Orange Tax Services

Being a home owner can imply multiple situations in the Dutch income tax return. If you live in the house, you can deduct the costs, if you rent out the house, the house is taxed in Box 3 and if you have left the Netherlands but still own a property, you are still taxed in the Netherlands. We can help you file a correct income tax return. Feel free to contact us.

I have been charged more than 52% income tax !

The maximum income tax rate in the Netherlands is 51.75% or as we refer to the 52% tax rate. How can you pay more?

52% income tax – too much

Persons arriving from abroad are terrified about the 52% tax rate we have in the Netherlands. Often those foreigners have the so called 30% ruling, so  the blow is softened.

The highest tax rate use to be 72% for your information. That takes any ambition you might have to earn a high income from you, but during this regime there were also plenty of tax deduction possibilities we can only dream of today. Today we have a system with a lower tax rate than 72% and with much less tax deductible items.

If the 52% income tax is the highest rate, how come some are charged 56% or 58% income tax on their salary?

This is not easy to explain, as basically everybody assume it is an error, but it is not. We are a socialistic country, hence the persons that earn more, need to carry more tax, then the persons earning less.

Part of the salary from employment is that the employer has taken into account the labour tax credit and the general tax credit. The higher the income is, the lower these two tax credits are. Up to a point no tax credits are taken into account.

If you then have an income of for instance EUR 55.000, you are not yet in the 52% tax bracket and you are entitled to labour and general tax credit. If you are then paid a bonus, or holiday pay or any other amount by your employer that is subject to wage tax, the percentage applicable can be 52%, as you are or are about to exceed the threshold to the 52% tax bracket. If than 52% tax is being withheld, not enough tax is being withheld, as the employer has taken into account during previous monthly salaries in this year with these tax credits.

I have been charged more than 52% income tax !
I have been charged more than 52% income tax !

The rule is that an employee who only has employment with one employer does not need to file an income tax return. But if then tax credits are not adjusted when a sudden additional salary is being paid, this rule can no longer be applied. A tax credit can be already too high if holiday pay is being paid. The tax office does not want 5 mln employees to file their income tax return, hence the employer is obliged to correct the too high amount of tax credit in the wage tax withholding as well.

Hence the higher amount of tax than 51,75% is possible.

Orange Tax Services

52% income tax is a high percentage, and a higher percentage is even more undesired. But is it? If not more than 51,75% is collected by the employer, then the employee is obliged to file an income tax return and then in that return is shows income tax is due. But at that time you already spend the money, so paying income tax then, is even worse. Hence the solution of a higher tax rate is in everybody’s interest, but nobody likes it.

Do I need to file an income tax return?

A frequently asked question, do I need to file an income tax return? That depends.

Do I need to file an income tax return? No:

If you are a regular employee for the full year, and you have no assets exceeding the threshold and or you have the 30% ruling, no need to file an income tax return, unless you are asked to file one.

If you are a regular employee for the full year and you have a tax partner who is also a regular employee for the full year, no need to file an income tax return, unless you are asked to file one.

Do I need to file an income tax return? Yes:

If you had more than two employers in one fiscal (= calendar) year, you will be asked to file a tax return.

If you know you need to pay tax, you are ought to know you are obliged to file a tax return before the general deadline. When do you know you need to pay tax? You know when you have been paid an amount without tax being withheld on the amount or the amount was paid next to the income from your employment. For instance royalty payment for a book, invention etc. You are paid a one off amount for a job you did. You receive payment from a foreign employer.

You are to file an income tax return if you had a company registered with the Chambers of Commerce in the fiscal year. Regardless if you made any income nor if you did any activity with the company. We do not know dormant companies, so yes you need to file the entrepreneurs income tax return.

You are to file an income tax return if your worldwide assets exceed the threshold.

 

Do I need to file an income tax return? Yes, it is in your advantage:

If you and your tax partner both work and you have a child younger than 12 years old, then the partner with the lowest income can have a tax credit, but only if you file the income tax return.

If you did a study in a year you had no income and you would like to set off these costs for a refund in later years, you can only do that if you filed an income tax return in the year of study costs being paid and you claimed for study costs in the income tax return.

If your tax partner has a Dutch taxable income and you do not simply because you do not work, then you can have a non-working spouse tax credit, but only if the income tax return is filed.

You are for instance a US national and you need your US tax return to be done, then the basis of that tax return is the Dutch income tax return, if you were a resident in the Netherlands at that time. Hence filing a tax return is to your benefit. If you need a very good US tax provider in the Netherlands, we know one.

Do I need to file an income tax return?
Do I need to file an income tax return?

Do I need to file an income tax return? I am nervous as I have never done one, will the tax office hunt me for it?

If you have read the above and you have the opinion you should not have been obliged to file an income tax return, then no worries, no income tax return was due. The system is such that the tax office does not want everybody to file an income tax return, only those tax payers who are required to file one.

However, if you read the above and you have the opinion you should have filed a tax return, you can still do that. Better to file one yourself than when the tax office finds out you should have filed a tax return. The difference is the value of the fine you get when the tax office asks you to file.

Orange Tax Services

We can file any tax return you like to have filed. The regular income tax return, non-resident income tax return and the migration income tax return are charged at EUR 390 incl VAT including possible tax partner. The entrepreneurs income tax return is charged at EUR 550 ex VAT including possible tax partner.

Dutch course costs tax deductible?

One of the more frequently asked questions is if the Dutch course costs tax deductible are. These costs are study costs, but are these study costs actually tax deductible?

Dutch course costs tax deductible as study costs?

Study costs is a deduction possibility in the income tax return. The requirement to qualify for this deduction is that the financial position you can gain with this study, or better said, the job you can get with this study, should yield you a taxable income or an increased income compared to your current financial position.

Which costs can you deduct as study costs?

You can deduct the tuition fee you paid for the study. Let me repeat myself: you can deduct the tuition fee you paid for the study. That implies if you did not pay for the study, but your parents did or your grandmother, then the burden of the costs was not on you, hence you cannot deduct the study costs.

You need to have made the tuition payment while you are a tax resident in the Netherlands. Often the payment of the study is made up front before arrival, then these costs should be taken into account in the tax return of the country you were living at that time of payment.

Besides tuition fee you can deduct the costs to take an exam. If the study obliges you to purchase items such as a hairdresser scissors, hammer, paint accessories, books, cd, software etc, these costs are tax deductible.

A computer or laptop and its hardware is not tax deductible.

Which study costs you cannot deduct?

Cost of living, interest on study debt, travel costs, housing, excursion costs, costs of decorating study room and explicitly mentioned the costs of Inburgeringscursus.

Are Dutch course costs tax deductible?

No. They are not.

The reason is simple. The course to learn Dutch, or English, Italian or French for that matter, is to general to pin point that course to getting a job and improve your financial position. You might argue that you are from abroad, do not know the language and you have been told it becomes easier getting a job when you speak Dutch. That might be true, but Dutch you can also use to do your groceries, go out for a nice evening, book a holiday. Such a course can never be connected to getting a better financial position, hence not deductible.

Orange Tax Services

Initially we agreed with the foreign tax payer that these courses do help you get in the system and the financial system much easier.  Initially we thought it could be up for discussion. But since many years we have learned that it is not up for debate. The tax office has a strong stand point in this field, Dutch language courses are not tax deductible.

Profit sale house taxed in Box 3 wealth tax?

The capital gain of the house you sold is not taxed, but money in the bank is taxed in Box 3. What if you temporarily have the yield of the sale in your bank and you have not spend it on the next house. Is that yield taxed?

Box 3 wealth tax

In the Netherlands we tried to simplify the system by putting everything in boxes. Box 1 for your income, Box 2 if you own shares in your own company and Box 3 wealth tax box.

I have written about Box 3 in the past, basically around 1.2% of your worldwide assets you have on January 1 is taxed in the income tax return of that year. Due to the fact that ‘Joe the Plumber’ understood that the tax of 1.2% is more than the interest received, the system has been made very complex but with the same outcome, to stop Joe the Plumber from understanding and complaining.

If you have EUR 100.000 in the bank and you have  a tax partner, then EUR 60.720 (2019) is tax free, hence over the difference around 1.2% box 3 taxation is due.

Box 3 wealth tax – temporary money in the account

It does happen outside your influence that you have a sudden amount in your bank, which is intended for a future investment. If that money is in the bank on January 1, it is part of the Box 3 wealth tax calculation, even when the money is taken out on January 2.

Box 3 wealth tax – court case

In November 2016 the house was sold of a Dutch tax payer and the yield of the sale was EUR 168.089. That made that his total assets on January 1, 2017 amounted to EUR 440.654 and he was due EUR 4.701 Box 3 wealth tax. However, the money of the yield of the house was to be used for the purchase of the new house in May 2017.

The Dutch tax payer made a complaint against the EUR 4.701 Box 3 taxation. The argument was that the taxation should be done pro rata for the period the amount was actually on the account.

There are two problems with this complaint.

  • Not address by the court, but it is a bit silly to fight the law. It is like arguing you can drive 150km/h at night even though max 130 is allowed. The law is the law and you can only argue the law when it is being made.
  • The Box 3 taxation is a rigid taxation is what the court replied. Rigid implies that it is for everybody the same, who has assets on January 1 is taxed for the assets regardless how long these has have been in possession. That is a choice law makers have made in 2001 when this law took its effect. At the time law makers were well aware of the rigid effect it could have and still chose to implement this type of legislation.

The profit of the house was taxed and the tax payer felt very disappointed with the outcome and even suggested to be able to deduct the tax over this profit as purchase costs of the new house. Again a silly suggestion, as it is clearly determined which costs are tax deductible when a house is purchased and Box 3 wealth tax costs are not among them.

Box 3 wealth tax – is there a construction to avoid taxation?

The word construction on its own makes the tax office red flags go out. Construction stands for doing something that is basically not possible. And that is also the answer. If you think I pay up front the notary the money for the house I am going to buy in May, then we expect the notary to send back the money, but if the clever tax payer paid the notary December 30th while the notary was skiing, it is still an asset in the Box 3 tax reporting. At that time there was no obligation to pay the notary, so the money has not left the equity of the tax payer.

Orange Tax Services

In the Netherlands we have a rather detailed tax legislation where most groups in society are being met with their needs and every year the Government invents more needs to be added to the list. The same Government complains that our taxation has become so complex. In the field of Box 3 wealth tax this path has not been followed, which is correct. Tax is unpleasant, nothing much you can do about that. Then again, taxation makes us live in a country with infrastructure and social benefits.

If you then have EUR 440.654 in the bank and you complain about the tax to be paid, should make you understand that we have agreed that persons who can bear more contribute more for the person who can contribute less. Nothing much that can be done about that other than changing the law, but as our Government needs money, new law will result in the same outcome.

Do I need to file an M form?

M stands for the migration income tax return, do you need to file an M form? That depends.

Migration income tax return

Migration is in fact you moving from one country to another. When you make this move, you move also your tax residency from one country to the other. If you move from abroad to the Netherlands, then the Netherlands likes to tax you as a resident tax payer for the period you were actually residing in the Netherlands. The period you were not a Dutch tax resident, so the period you were residing abroad in the tax year, that period is not taxed in the Migration income tax return. The exception to this rule is property you owned in the Netherlands while you were living abroad.

How does the tax office know you have migrated from or to abroad?

Simple, every resident in the Netherlands needs to register him or herself with city hall. City hall communicates to official institutes such as the Dutch tax office.

What if you forgot to register and you do this much later, or even a year later, what is than the date of your migration?

The date of your migration is not the registered date, but the actual date. If you were too late with updating city hall, you basically need to proof to the Dutch tax office with facts and circumstance what was the true date of migration.

Do I need to file an M form?
Do I need to file an M form?

The migration income tax – Do I need to file an M form?

You are required to file an M form or any other tax return if the tax return has been issued to, regardless if you have anything to be reported.

You are required to file an M form or any other income tax return, if you know you need to pay income tax.

You are required to file an M form if you owned a house in the Netherlands, but if the house is rented, you only actually need to send in the tax return if you are tax due over the house.

Not always the tax office issues to you an M form or the tax office spreads the issuing of the M form over the year, hence some are invited earlier to file an M form than other. What if you know you can have money back, what can you do then? Then you can contact us, and we process the M form immediately without applying for it.

To file a M form, can I do it myself?

Yes you can, but the form is horrible. It is a large form, not the easiest form. Regular tax returns can be a challenge for Dutch natives, the M form exceeds this category. So yes you can do it yourself, we think you are a brave man if you succeeded.

Orange Tax Services

For the regular Dutch accounting firm the Migration income tax return is an exotic tax return to be filed. For us it is core business. We file hundreds of M forms on a yearly basis, hence we think we have sufficient expertise in the office to assist you. The 2019 rate to file your M form is EUR 390 incl VAT including your tax partner. The M form we can file for you for max 5 years back, that is the period 2014-2018. If you are not sure if a possible refund from the M form exceeds our fee to file, simply ask us to CHECK (indeed with capital letter to avoid mistakes) if you can have a refund. Checking is free, filing is charged at EUR 390 incl VAT including your tax partner.

 

Profit made with sale of your house taxed?

The current housing market is such that it is very likely you make a profit on the sale of your house, but is that profit taxed? Yes and no.

No capital gain tax

In the Netherlands we do not know capital gain tax for private individuals. That implies a profit made on the sale of your property is not taxed. The tax treaty the Netherlands has with other countries in the world state that if the property is situated in the Netherlands, only the Netherlands can tax the profits. The fact that the Netherlands does not tax the profit does not make it possible for the country where you are living in while the house was being sold (if you migrated before the sale), can tax that profit. Even though the other country is very keen to do so.

The profit is therefore not taxed, but at the start of the article I stated ‘Yes and no’. Can the profit be taxed. Not exactly as such, but in a U turn that limits your deductions, which is more or less the same.

You need to invest the profit in your newly purchased home

The moment you sell your house and you make a profit, the Dutch are known to purchase a car or a boat, then they purchase a new house and fully mortgage that and deduct 100% of the new mortgage interest from the income, while enjoying the car and or boat.

That possibility stopped in 2012 when the crisis hit the housing market and measures needed to be taken.

The moment you sell your house for a profit, this profit needs to be reinvested in the newly purchased home, if you purchase a home within a five year period from the moment you sold your previous home. If you fail to do so, then the interest related to the new mortgage will never be tax deductible anymore for the part that can be allocated to the value of the profit.

Example

So assume you made a EUR 100.000 profit with the sale of your house. You purchase a new home for EUR 350.000. The tax office expects you to pay with your own money (from the profit) EUR 100.000, hence the max loan you can take out is EUR 250.000.

If you decide not to do so, then the loan for the newly purchased home is EUR 350.000 let us assume at 2% interest, then EUR 350.000 minus EUR 100.000 is EUR 250.000 the amount over which you can deduct the mortgage interest. That is EUR 250.000 times 2% being EUR 5.000, but you paid in total EUR 350.000 times 2% is EUR 7.000 interest, hence EUR 2.000 of that amount will never be tax deductible anymore.

Profit made with sale of your house taxed?
Profit made with sale of your house taxed?

What is profit in this matter?

Profit you would assume is the value you sell the house for minus the value you purchase the house for. But that is not what the tax office thinks is a profit. The tax office states that profit is the difference between the value you sell the house for minus the mortgage debt at the time of the sale. This amount is then adjusted with non-deductible costs such as real estate agent costs and some marginal costs.

What if you purchased a new home and you sell your present home at a later stage?

The moment you purchase a new home, you cannot know what or if you make a profit with the sale of your old home.

How can you then allocate the profit of the sale to the new house?

For this situation you simply need to make the calculation later, the moment you actually sell, and then either repay a part of the mortgage with the profit made, or invest the amount in the new house (new bathroom, kitchen, roof etc).

What if you never sell the old home but you rent it out?

The moment you move your household from the ‘old’ home to the new house you basically need to have a valuator valuate the old house. That valuation report is than the sale price. That price minus the debt you had on the house the moment you moved out is the profit. Due to the fact you did not sell the house, you therefore have no possibility to use the profit to make a down payment on the new house, you automatically arrive in the situation where you cannot fully deduct the mortgage interest.

Should you make the effort of the valuator making a valuation report? Yes you should, because if you do not, and the tax office is doing an audit on your tax situation two or three years later, the tax office can take a stand point that the house had a much higher value at the date you moved out. Then you cannot counter their stand point. Will you be audited? Yes, we expect in these situations the tax office to do an audit on your tax return, as there is money to be gained by the tax office.

Orange Tax Services

We think that a professional mortgage advisor will address the topic above and hold your hand through the process. A process you can still make your own decisions. Yes I prefer to buy the car and not have the full mortgage deductions, or no, I want the fiscal most efficient method. We can only suggest you to go to Expat Mortgages as they are just doing this for you, the expat.

Non working spouse refund

Your non working spouse might be more fiscally attractive than you thought so far. A refund can be obtained. How does that work?

Non working spouse refund

If you work in the Netherlands you pay income tax in the Netherlands. If your spouse is not working, then your spouse is entitled to a refund because you do work. There is a minimum income requirement, but basically if you earn more than EUR 10.000 annual salary, your spouse can have a full refund.

Why the non working spouse refund?

In the Netherlands we believe partners should be treated equally, hence the working partner can cash the general tax credit against the income tax due over the taxable income. The non working spouse cannot cash the general tax credit by lack of taxable income. As this is regarded an unwanted effect of not having an income, the general tax credit is paid out to the non working spouse.

How is the non working spouse refund paid out?

To claim this refund, an income tax return needs to be filed. That income tax return is in general filed by the two related tax partners. The one provides the income details, the other provides nothing by lack of income details. Automatically the outcome of the non working spouse is a refund.

Often the working partner is keen to provide bank details, but one of the conditions is that the refund is paid out in a bank account that is at least in the name of the non working spouse. It can be a joint account.

Non working spouse refund

How much is the refund?

That depends on age and year.

If you are born before 1963 then the refunds are

EUR 2.477 (2019)
EUR 2.265 (2018)
EUR 2.254 (2017).

If you are born later, the refunds are

EUR 661 (2019)
EUR 755 (2018)
EUR 902 (2017).

Big four income tax return

We often see that large corporations offer their employees an expat package which includes the income tax return being completed by one of the big four tax consulting companies. However, not part of that package is the spouse, hence the refund is not claimed.

Orange Tax Services

We can file for max five years back the income tax return. If you provide us the filed tax return by the big four companies, we create the tax return for the spouse to claim back the refund over the past 5 years. We do not refile the already filed tax return by the big four company, as we do not want to interfere with their expertise.

2017 income tax return – final call

The tax year is nearly at its end and the question is whether you have already filed your 2017 income tax return.

2017 income tax return – Do I need to file?

Invitation

The 2017 income tax return is due when you have been invited to file this tax return. It is possible that you are automatically taken into the delay system of a tax advisor you might have used in the past. That is the reason why you have not received any reminders. However, May 1 2019 this delay rule ends and if you were supposed to have filed, you will  be reminded by then.

Ought to know

You are ought to know the legislation of the Netherlands. Most Dutch are not aware of the full legislation, let alone you the non Dutch. The rule states that if you know you need to pay income tax, you are to file your income tax return not later than two weeks after the deadline. The deadline is May 1, 2018. Hence by May 15, 2018 you should have filed your income tax return.

2017 income tax return
2017 income tax return

2017 income tax return – Ought to know, what is that about?

The Dutch tax rules state that you have to file an income tax return when you know you need to pay income tax. When do you know that you need to pay income tax? That is the case in the following situations:

Two employers in one year

You had two employers in one year. If you earned with one employer about EUR 20.000, you are in the first tax bracket. If you earned again EUR 20.000 with another employer, maybe while you had two jobs at the same time, this employer calculated the first bracket tax rate. In the income tax return these two are put on top of eachother and then you end up in the second tax bracket. Hence you are due additional income tax.

Source of income other than employment

In the event you had a company like a one man company or you performed services for which you had not registered a company, but these services are regarded a source of income, then you need to file an income tax return to report this income.

What could be a source of income? If you for instance trade in bitcoins where you exceed the normal assets management activities. You trade on a daily basis, selling, buying and making a profit, then this is a Box 1 income. If you hold bitcoins and you trade a few times per year, this is a Box 3 aspect of your tax return and you also need to file a tax return if your total assets exceed the threshold.

Owning your own home

Owning your own home is in fact a source of income, but as the costs of this income – the mortgage interst– often exceeds the income – percentage of WOZ value – , it is a negative source. Hence it will result in tax back or you pay less tax. In normal circumstances the tax office does not accept a constant negative source of income, then the source is referred to as a hobby. But in case of the home owner it is accepted.

You need to file your tax return to claim the refund. If you already were paid out the refund on a monthly basis during the year, you still need to file the tax return as the tax office would like to check if what was paid to you was indeed correct. In the event you decide not to file nevertheless, the tax office will demand you to pay back whatever they paid to you and you get a penalty for not filing the income tax return.

World wide assets

If you hold a so called 30% ruling, you do not need to report your worldwide income. However, the exception to this rule is property owned in the Netherlands. As many persons invest in buy to led property these days, this is something that needs to be reported.

Others who do not have the 30% ruling or no longer have the ruling and that exceed the threshold for reporting the world wide assets, need to file an income tax return.

Migration income tax return

If you migrated to or from the Netherlands during the year, then the chance is that you are entitled to a tax refund. If you are not sure you can have a tax refund or at least a tax refund exceeding our fees, you can always ask us to check if you can have money back. But please stress the fact ‘check’.

Orange Tax Services

The above list is not a limited list, there can be other reasons why you need to file an income tax return .For instance you received alimony payments for yourself, you had a 401K pay out in 2017 or an IRA distribution. Your Roth IRA value exceeds the threshold. Even if you own property abroad, which are not taxed in the Netherlands, you sometimes need to file an income tax return.

We can file that income tax return for you. Our fee is still in 2018 EUR 370 incl VAT, from January next our fee is EUR 390 incl VAT. For entrepreneurs our fee is EUR 550 ex VAT. Feel free to contact us.