Dutch Social Premiums and Income Tax

By Richard Bierlaagh, Global Mobility Tax Advisor

Dutch Income Tax 101 — want to understand what you pay for, and how your contribution is calculated? The key points below outline the basics regarding social premiums and income tax.

SOCIAL PREMIUMS

What is it? Personal contributions for nationalized social insurances and employee insurances in order to warranty the ‘social minimum’.

What is the base? The ‘premium bearing wage’, which is capped at € 35.472 annually (2022)

What is the rate? Combined rate of 27,65%

What does it buy?

Social Insurances:

• Basic retirement
• Chronic care
• Widow care

Employee Insurances

• Illness
• Invalidity
• Partial Disability
• Unemployment

INCOME TAX

What is it? Mandatory contributions to general state funds

What is the base? World income for tax residents, Dutch income for non-tax residents

What is the rate? In general: 37,07% for income up to € 69.398, 49,50% for any excess. Credited against social premiums.

What does it buy? Other aspects of ‘state’

Box 1: 37.1& — 49.5&

What’s in the Box?

Profits from Proprietorship Is: proceeds from a durable assembly of capital and labor aimed at making foreseeable profits. Taxed: attributable turnover -/- attributable costs and specific tax deductibles.

Income from Employment Is: any income derived from foreseeably profitable but incidental activity (eg. gigs and lectures) and specific sources allocated here to prevent abuse (eg. loans to your own company).

Home Ownership Is: the deemed benefit of home ownership (% of assessed value) -/- the costs of purchase and improvement related qualifying debt.

Other Income Is: any income derived from foreseeably profitable but incidental activity (eg. gigs and lectures) and specific sources allocated here to prevent abuse (eg. loans to your own company).

How is it taxed?

• The annual sum of income derived from Box 1 sources is included in the Box 1 taxable base as it accrues (i.e.: first when payment is owed and reasonably expectable and ultimately when paid).
• The progressive percentage is applied to said taxable base.
• Losses can be carried forward indefinitely
• Wage tax paid during the year is deducted from the calculated Box 1 charge.

Box 2: 26.9%

What’s in the Box?

Results from ≥ 5% Stakes Is: dividends and capital gains, in cash and in kinds, derived from ‘significant stakes’ (5% or greater).

How is it taxed?

• The annual sum of income derived from Box 2 sources is included in the Box 2 taxable base as it accrues
• (i.e.: first when payment is owed and reasonably expectable and ultimately when paid).
• The flat rate tax is applied to said taxable base.
• Dividend withholding tax paid during the year is deducted from the calculated Box 2 charge.

Box 3: 31%

What’s in the Box?

Savings, Accounts & Cash Is: any savings or cash account (at any institution anywhere).

<5% (‘Portfolio’) Stakes Is: any non-significant stake in any entity anywhere.

Other Assets (Investments) Is: any other asset anywhere, such as a second home or a privately held receivable, except if explicitly exempt (such as art exhibited in a museum or a publicly accessible estate)

-/- Investment Loans and € 50.000 threshold Is: any debt entered into to finance investments or assets with.

How is it taxed?

• The Box 3 taxable base consists of the net fair economic value of the Box 3 assets and liabilities on Jan 1st multiplied by a progressive deemed return percentage of 0,06%-5,69%.
• The flat rate tax is applied to said taxable base.
• The actual return is not taken into account.
• Any (foreign) source withholding tax is deductible from the tax charge.

Learn More About Living, Working and Paying Taxes in the Netherlands

Archipel is a Dutch tax firm in The Hague, they are Tax Tech on the front end, a quality boutique at the back. Archipel Tax Advisors translate between real life and taxation to provide tailor made solutions and a personal approach.

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