Tax returns in the Netherlands in 2021: the expat basics

Tax returns — the grown-up matter we’ve all been somewhat ignoring is finally upon us: it’s time to file your taxes! 

Being an expat in the Netherlands can make this process even more overwhelming than usual, but the money you could receive back makes the time and effort worth it (trust us). Let’s get an expert look in at how to do your tax return in the Netherlands as an international, shall we?

When is the Dutch income tax season?

The time to file taxes in the Netherlands rolls around each year in March and April. Usually, this means bills to pay, but if you do things correctly there’s a chance you can also get some money back from your taxes in the previous year — so, in 2021 you will be filing for your 2020 tax returns. 

A mysterious blue envelope might have slipped through your mailbox recently, inviting you to the magical wizarding school of…oh no sorry, inviting you to file for tax returns. 

However, if you don’t receive one of these blue invitations, it doesn’t mean you’re not eligible to file for tax returns in the Netherlands. In this case, speaking to a tax consultant is a good way to know if you are eligible to get any money back.

We teamed up with expert tax consultants at HBK to bring you the most up-to-date advice on tax returns. Our friends Daniel and Saskia are specialized in expat tax matters at HBK, and can give you tailored advice on your tax situation. “We deliver what gets you ahead,” says Daniel, “and we turn complex matters into simple solutions, with a personal touch.”

Why do you need to file a tax return?

As much as we all dread this process, it’s an important one to complete as it can save you heaps of money when done. You can also be fined if you don’t submit, and your toeslagen situation can also be affected. In short: file, or lose a bunch of cash. 

The deadline: submit by April 30, 2021

You will need to have submitted your tax return forms by April 30 at the latest — set a reminder, put it in your calendar, tattoo this date into your brain if you have to.

Some Dutchies will be stressing to have this done by April 1, as then they can potentially get a refund by July 1. But this is not necessary and is only for those wanting to get money back as soon as possible. 

It’s good to know that if you miss the April 30 deadline, you can apply for an extension (a tax advisor can help you with this).

Important dates for tax in the Netherlands

When What
January 1 Beginning of tax year for individuals
April 1 Potential early refund deadline
April 30 General tax return deadline
April 1 – June 1 Apply for extension
July 1 Receive potential early tax refund
September 1 Extended deadline for individuals who apply for extension
April 30 (the following year) Latest date tax return deadline can be extended to by a tax consultant

Personal tax deductions in the Netherlands

Before we get stuck in, let’s start with the good news! There’s a whole range of personal deductible items that are valid for your tax return in 2021. 

What are personal deductible items you may ask? Put simply, your personal situation may mean that you are entitled to claim money back on the tax you are due to pay. 

Photo-of-people-doing-Dutch-taxes-2021
How to file taxes in the Netherlands. Time to get stuck in the paper-work! Image: Scott Graham/Unsplash.

The items that entitle you to tax deductions change each year, however, so it might be wise to consult a tax advisor if you’re not completely sure about how and if you can deduct certain costs.

Let’s run through some situations that may entitle you to personal tax deductions in the Netherlands this tax season.

Tax deductions when you own a house in the Netherlands

First of all, we’ll start with the lovely Dutch word of hypotheekrenteaftrek, translating to “mortgage interest deduction.” Under this, you can declare the interest you pay on your mortgage and deduct it from the amount of your taxable income, on which you have to pay taxes.

Certain costs that you made when buying a house are also deductible from taxes. These costs include valuation costs, the fee for the NHG (National Mortgage Guarantee) and some of the notary fees relating to the mortgage loan. 

If you’re confused about what tax deductions you are entitled to as a homeowner there’s no need to pull your hair out. A good tax intermediary, such as HBK, can take the wheel for you. 

Tax deductions when you study in the Netherlands 

You may also be entitled to tax deductions this year if you are a student and paying for your study — depending on what you are studying. 

Whether your degree entitles you to a tax deduction depends on the job it is intended to prepare you for and whether it will increase your taxable income. If your degree is deemed to be one that helps you, a taxpayer, to secure a better position in the labour market — then happy days! You can claim money back on essential costs such as examination fees, certain software and any books/study materials that were necessary for your course.

Photo-of-Daniel-from-HBK-tax-associates
Daniel from HBK can help you out with that tricky tax knowledge. Image: HBK/Supplied.

It’s important to note, however, that you can’t claim tax back on items such as laptops or printers and you must have been a resident taxpayer in the Netherlands by the time you made your costs.

Also, 2021 is your last year to make deductions based on your study costs so make sure you pay all your study bills before the end of 2021! As of the 2022 tax year, tax deductions for your study costs will no longer be possible. 

Tax deductions for charitable donations

Fun fact: in the Netherlands, you can also claim tax deductions for certain charitable donations that you made throughout the year. 

The charities must be recognised as an “institution or organisation for public benefit” and have a non-profit motive. Give a little, get a little truly applies here! 

Other personal tax deduction possibilities.

Daniel tells us that there are many situations that can save you money on your taxes. “Other examples of deductions are specific medical expenses,” he says. “As well as this, you may also be entitled to a tax deduction if you are paying partner alimony.” 

Averaging tax in the Netherlands 

What is averaging?

Are you a freelancer? Is your work seasonal or commissions-based? Maybe you’ve had different jobs in the past three years, or went through a patch of unemployment? 

If so, you’ve had what they call a fluctuating income. In this case, your income tax over the past three years can be averaged out, and you can get significant refunds.

“You can request for averaging by filling out a form and sending it to the Dutch tax authorities,” explains Daniel. “However, this form is only available in Dutch, which makes the process more difficult for expats.” 

How much are we talking about and how can you get it?

The difference in tax needs to exceed €545 since you will only get the surplus refunded. But bear in mind you’ll need to meet some other conditions too in order to apply for an averaging refund:

  • You have been a resident of the Netherlands for all three years which you wish you average.
  • You need to have a Final Tax Assessment for each of these three years, where you no longer can file an objection if you filed a tax return.
  • You’ll need to fill out a separate request within 36 months after the date of the Final Tax Assessments.
  • You cannot include a year which you have already filed an averaging request for. 

Have an advisor help you 

If you’re feeling a little overwhelmed, do yourself a favour and get some help from a tax advisor. They can help you check whether you are entitled to a refund over the three years combined and fill out the form, so you can get that surplus of €545 added to your bank account. Score!

Filing a tax return as an expat in the Netherlands

Life as an expat can sometimes be overwhelming and throwing tax season into that mix can be one heck of a confusing cocktail. But bear with us, there are actually some advantages to being a bamboozled expat in the Netherlands.

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Dutch tax season looks like this, but less pen and more blue envelopes. Image: Scott Graham/Unsplash

The 30% ruling — for incoming employees

Have you been hired to come and work in the Netherlands? Or have you been transferred to the Netherlands as part of your work? Under the 30% ruling, incoming employees are granted a 30% fiscal break in order to cover their costs of moving to the Netherlands.

What does this entail? You may be entitled to keeping 30% of your wage, including reimbursement for moving costs — tax free! 

However, it’s important to bear in mind that there are a number of strict conditions that have to be met in order to be eligible for the 30% ruling. Also, how long this allowance lasts depends on when you applied for the ruling. Finally, you need to apply for (and be approved) for the ruling by the government. 

But we’re not complaining — something is better than nothing after all! 

Filing taxes in the Netherlands and another country: How to avoid double taxation

As is the case with many expats, you might have income coming from more than one country, or assets in more than one country. The risk here is that you get taxed twice, which of course you want to avoid.

Unfortunately, every situation is different — so it’s best to chat with a tax advisor about your unique setup to save you some serious cash.

The infamous M-form: a guide for expats in the Netherlands

Just when you thought filing your taxes in the Netherlands was confusing enough, you then find out that there are many different forms for different taxes/circumstances. The four main income tax forms are:

  • C Form – Foreign residents that are earning money in the Netherlands but living/working in a different country
  • P Form – Private individuals
  • W Form – Freelancers and business owners that are making money
  • M Form – For people who have migrated to or from the Netherlands

Let’s talk about the M Form. The M stands for migration, meaning — you guessed it — you must fill it out when filing your tax return for the year you either migrate to, or leave the Netherlands as a taxpayer. 

In this situation, you have usually spent part of the year living abroad and part of the year in the Netherlands, so the Dutch tax office needs to figure out just how much tax you should pay! Usually, the Dutch tax authorities will send you an invitation to file your tax returns. The deadline for this is normally July 1. 

Note: The M-Form is only for the year that you immigrate to/migrate from the Netherlands. Once you have lived and worked in the Netherlands for an entire year as a tax paying resident, you file for your tax returns using a P-Form. 

When you migrate to the Netherlands, the form comes in two parts, however, it’s all compiled into one form. The first part concerns your situation while you were outside of the Netherlands, and the next part concerns your situation while in the Netherlands. 

There are a number of complicated factors involved in filling out the M-form. Firstly, it must be filled out on paper — not online. And secondly, it’s 43 pages long, and entirely in Dutch (because that makes sense?) 

It is strongly recommended that you turn to a tax advisor when it comes to dealing with the monstrosity that is the M-form. The employees at HBK are more than happy to take this papery weight off your shoulders and chances are they will make a discovery you didn’t realise! 

For example, Daniel tells us that individuals who are only employed in the Netherlands for a part of the year are usually entitled to a tax refund. “This is a very common situation in M-forms, so it is definitely worthwhile to investigate whether you are entitled to a tax refund if this situation applies to you!”

What has changed in 2020 for filing taxes in the Netherlands

A few changes were made for taxation in the Netherlands last year, which will affect how you file for tax refunds now (2021). Here’s what you need to be aware of:

Tax brackets

The number of tax brackets has been reduced from three to two for the 2020 financial year.

Income Tax rate (%)
Below €68,507 37.35
Above €68,507 49.5

These are reduced taxation rates from previous years, meaning net salaries will be higher. Whoopee!

What is a tax consultant and do I need one as an expat in the Netherlands?

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Get advice from the experts when completing your taxes in the Netherlands. Image: Tim Gouw/Unsplash

Personal advice and tailored approach

A tax consultant will advise you on your tax situation. They will make sure you are aware of your obligations as well as any possibilities to lessen your tax burden. If you like, they can also deal with your tedious administrative affairs for you, so you don’t have to fill out that M-form. 

But the most valuable thing a tax consultant can offer is proactive insight. They can let you know how to minimise your tax liability before you even ask, and they’ll quickly be able to provide you with in-depth knowledge of your tax situation. Daniel and his colleagues at HBK can create tailored tax plans for your personal situation.

In a nutshell? They may help you save money in areas you would not have seen yourself.

Connect with HBK

If you still feel overwhelmed and (understandably) confused, don’t worry. This is what tax advisors are for. Consultants such as HBK specialise in helping expats in the Netherlands with their tax. With their help, you can make the most of the tax season and make your life in the lowlands a little easier too.

 

Feeling a little less scared of that pesky blue envelope? Tell us your Dutch tax experiences in the comments below!

Feature Image: Anna Shvets/Pexels.

Emily Burgerhttps://emilycburger.wixsite.com/expression
Emily grew up in South Africa but has also lived in Egypt, the UK, Canada and now the Netherlands. She first came here for her Bachelors in Arts and Culture at Maastricht University and soon fell in love with the land of canals, clogs and cheese. When she's not daydreaming about sci-fi movies or countries yet to explore, you can find her writing for DutchReview.

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