NETHERLANDS Law and Practice Contributed by: Nathalie Idsinga and Mignon de Wilde, Arcagna
1. Tax 1.1 Tax Regimes Dutch Tax Residency
income to these boxes determines the applicable tax rates and deductions. The three boxes are as follows: • Box 1: Income from employment, business activi - ties, and principal residence – rates range from 35.82% to 49.50% (2025). • Box 2: Income from substantial interest – taxed at 24.50% on the first EUR67,804 and 31% on the excess (2025). • Box 3: Deemed income from savings and invest - ments – taxed at a flat rate of 36% (2025). Regarding Box 3, the Dutch Supreme Court has ruled that the current wealth tax system, which taxes sav - ings and investments based on a fixed deemed return, violates the European Convention on Human Rights (ECHR). As a result, taxpayers may opt to be taxed on their actual return on investment until a new Box 3 regime is implemented (see Box 3 below for a more detailed explanation). The Netherlands provides levy rebates ( heffingskortin - gen ). Two of the most significant are: • the general levy rebate, up to EUR3,068 per year (2025); and • the employment levy rebate, up to EUR5,599 per year (2025). Additionally, certain personal allowances – such as alimony, medical expenses, and charitable donations – are first deductible from income in Box 1. If Box 1 income is insufficient to fully utilise these deductions, the remaining amount may be offset against income in Box 3, and subsequently in Box 2. Taxpayers are assessed individually, even if they are married or living together. However, certain income, deductions and assets may be freely allocated between fiscal partners, allowing for tax optimisation. Note that unmarried cohabitants can only be treated as fiscal partners if specific conditions are met. In addition to personal income tax, residents are generally required to pay mandatory social security contributions, which cover several national insurance
In the Netherlands, residents are subject to tax on their worldwide income and assets. Non-residents, on the other hand, are taxed only on certain income and assets that have a connection to the Netherlands (see the section on Non-residents below). Notably, domi - cile is generally not relevant for Dutch tax purposes. Under Dutch case law, an individual is considered a tax resident if, based on all relevant facts and circum - stances, there is a “durable bond of a personal nature” with the Netherlands. This determination generally takes into account factors such as: • the availability of a (primary) residence; • the location of the individual’s habitual abode; In this context, subjective intentions or the number of days spent in or outside the Netherlands are less significant. It is possible for an individual to have durable ties with more than one country. In these cases, the existence of the strongest personal bond does not necessar - ily determine tax residency. Relevant tax treaties may contain tie-breaker rules to resolve such conflicts. However, it should be noted that the Netherlands has concluded only a limited number of treaties that address gift and/or inheritance tax. Personal Income Tax in the Netherlands In the Netherlands, personal income tax is regulated by the Personal Income Tax Act 2001. The tax year runs from January 1st to December 31st, and tax returns must be submitted by May 1st of the follow - ing year. Extensions for filing may be granted upon request. • the place where the family lives; and • the individual’s economic interests. Residents are taxed on their worldwide income, whereas non-residents are taxed only on income sourced in the Netherlands. Income is categorised into three separate “boxes,” and the allocation of
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