People lucky enough to be able to claim the 30% ruling are well aware of the financial advantages it brings. And who would not like having up to 30% of their salary untaxed? But the ruling does have another very important tax advantage, which often gets forgotten.
The new Dutch government is planning to reduce the duration of the 30% ruling from eight to five years – although nothing has yet been set in motion. Nevertheless, the start of a new tax year is always a good time to have a look at ways to make the most of your Dutch income, whether or not you still benefit from the tax deduction.
If you are able to benefit from the 30%-ruling, it can have a large impact on your assets as well as your salary. This is because you can opt to be considered for partial non-domestic taxation, which means that you don’t need to state your assets in your Dutch tax return – with the exception of Dutch investment property.
To qualify for partial non-domestic taxation, you need to make sure your tax return is completed properly and if you mention you have a Dutch bank account, you do not qualify. In that case, you will be treated as a full resident tax payer and you will need to state all your worldwide assets instead.
‘All the more reason why it is crucial to get proper advice,’ says tax expert Lennart Suurmond. ‘People may think filling in their tax return is relatively straight forward, but if you’ve got foreign assets, it may not be.’
You can benefit from partial non-domestic status for as long as the 30% ruling lasts. Once you are no longer eligible for the ruling, you can no longer opt to be considered a partial non-domestic taxpayer. In other words, you will become a domestic taxpayer and will need to state your worldwide assets in your Dutch tax return.
‘We notice that taxpayers who have benefited from the 30% ruling find it somewhat uncomfortable to suddenly have to start talking about their assets, particularly their foreign ones,’ says Lennart.
‘But it is really important to be honest and fill in your tax form correctly. The Dutch tax office is particularly hot on foreign bank accounts, and you can be fined up to 300% of the unpaid tax if you forget to mention them.’
This means of course, that not only will you have a lower take-home salary when the 30% ruling ends, but that you will need to start thinking about your wealth and what this will mean for your tax return.
This year, each individual may have up to € 30,000 in assets before the asset tax kicks in. Your assets of between €30,000 and € 100,000 are taxed at 0.795%; assets of between €100,000 and €1m will be taxed at 1.356%; and anything over that at 1.614%.
Given these fixed amounts of tax are unrelated to the actual income your assets generate, the higher your income, the more tax efficient you are. But they are still amounts which have to be found and paid.
Real estate is also taxed in box 3 – according to its official WOZ value. Your local council will send you a letter detailing how much your Dutch property is worth every year. If the property is rented out, the value can be reduced, depending on the amount of rental income it generates. That rental income itself is not taxed.
You also need to include foreign real estate in your tax return and request a deduction for double taxation. In most Dutch tax treaties, the taxation of real estate is always allocated to the country where the property is located.
If you would like to find out more about maximising your tax efficiency and decreasing your risk of fines, please feel free to contact Suurmond Tax Consultants www.suurmond-taxconsultants.com .
Our experts have been helping expats from all over the world make use of existing tax regulations in the Netherlands to reduce their tax liability for more than 30 years. We offer a free tax scan, to check whether you are making the most of the opportunities on offer. Feel free to email firstname.lastname@example.org