First thing's first, if you're going to stay in the Netherlands for a while, you should know if you're legally required to pay taxes. The truth of the matter is you will be once you've gained legal residency or citizenship. Unlike in other countries wherein to be a tax resident there, you have to stay in the territory for a certain period of time, here in the Netherlands, the moment you move here and find work at a Dutch company, you're automatically a tax resident. And if so, you'll have to contribute your income tax and file tax returns every year.
But how exactly does the income tax work here in the Netherlands? Well, if you earn income from your employment here, that requires you to contribute your fair share to the Dutch tax office or 'Belastingdienst.' Taxable income also comes in the forms of substantial interest or investments you may be earning from here in the Netherlands. Though they're guided by different types of taxes instead. More often than not, your income tax is already deducted from your paycheck every month for less hassle. Now, all you have to worry about is filing your income tax returns after every tax year.
For foreign workers who live in the Netherlands, they get what's called a 30% ruling. Now, what is this, exactly? For overseas workers who were recruited to work in the country because of their special skills, 30% of their gross salary every month is free from income tax. In fact, the ruling even applies to bonuses, holiday allowances, and more. This means they automatically contribute less than normal tax residents every month. However, the eligibility for this ruling still depends on how much one earns every year, and the worker him/herself must apply for this ruling at the Belastingdienst.
Speaking of Belastingdienst, while this entity does take care of federal taxes as a whole in the Netherlands, it's not the be-all and end-all of the overall system. There are still regional taxes to look out for in this country. Various local governments have out it upon themselves to impose certain taxes and set certain rates for their respective residents. For instance, in Amsterdam, the country's capital city, they planned to impose an advertising tax on businesses in the hope of lessening the advertisements seen throughout the city. The greater the visibility of the ad, the higher the tax rate the business has to pay.
Of course, even the Dutch can't escape the VAT or Value-Added Tax. The Netherlands also imposes this tax on its many goods and services, helping them earn more revenue to keep the country running smoothly. For common products—food, drinks, medicine, books, etc—the VAT rate is at a flat 9%. While for various activities within the country, the VAT rate is higher at 21%. Now, what you might not know about the VAT system in this country is that you can actually get a refund. You can only do so if you permanently live outside the EU and you only purchased a minimum of €50.00 a day while you were here.
What you might not know about the Netherlands is that it also imposes a tourist tax. Though it depends on where you are in the country. If you're in Amsterdam, for instance, the tourist tax rate here is 7%. But since the start of 2020, they've also imposed a new rate for staying in hotels and camping sites. From that point on, tourists who booked a hotel room will have to pay, on top of the 7% tourist tax, €3.00 per night. While on camping sites, the charge is €1.00 per night.
Property tax in the Netherlands, also known as 'Onroerendezaakbelasting,' is another contribution tax residents have to make here. If you're a tax resident and you bought a property in a certain area within the Netherlands, you have to pay at that place's specific rate. It differs from municipality to municipality, but the idea remains the same. Generally, property tax rates range from 0.1% to 0.3% but it all still depends on what your local government set and the value of the property you purchased. But where do these contributions go exactly? Each municipality uses them to improve the public areas of the town.
If that wasn't enough, the Netherlands also imposed an inheritance tax as well, also called the 'erfbelasting.' Any asset you inherit here in the country is taxed, with the rate depending on the estimated value of what you inherited. And this applies for gifts too! Let's say a very rich friend of yours gave you a new house and a lot as a present. You'll be taxed on that under both the property tax and the gift tax. In terms of rates, the inheritance tax and the gift tax share the same rates. And they both depend on the value of what you just acquired.
If you want to live an easy, simple, and comfortable life here in the Netherlands, you ought to familiarize yourself with the country's tax system. They do things differently around here and the more you know about it, the better!
And once you've understood everything, you can finally invest in a luxurious Dutch apartment for your stay here. It's the only home you'll deserve!