Types of income tax
If you live in the Netherlands, you are subjected to pay tax on your income. Some of your expenditures may be tax-deductible (deductible items).
For tax purposes, income is divided into three categories (known as boxes).
- income from work and home ownership (box 1);
- financial interests in a company: a so-called substantial interest (box 2);
- savings and investments (box 3).
Tax on income from work and home ownership (box 1)
In box 1, you pay tax on your taxable income from work and home ownership.
Income from work includes:
- salary, tips or business profits;
- benefit, pension, annuities and maintenance payments;
- income from abroad;
- income earned as a freelancer, childminder, artist or professional athlete.
Income in box 1 is taxed at a progressive rate with four tax brackets. Once you have reached the state pension age, a special rate applies. The government intends to reduce these four tax brackets down to two in 2021.
Deductible items and tax credits
Some expenditures are deductible from your income from work and home ownership (personal allowances). The tax is calculated on the remaining amount. Your tax credits are then deducted, leaving the amount of tax payable.
Tax on substantial interests (box 2)
In box 2, you pay tax on any substantial interests. You have a substantial interest if you, or you and a tax partner together, own at least 5% of the shares, options or profit-sharing certificates in a company. You pay 25% tax on income from substantial interests.
Savings and investments (box 3)
You pay tax on income from your wealth, including savings, shares and a second home. It is calculated as the value of all assets (such as savings and shares) minus any debts. Part of your wealth is not taxable: the capital yield tax allowance. You pay 30% tax on your taxable income from savings and investments. The government assumes a fixed return, which varies, depending on your savings and investments.
More information income tax
If you have any questions concerning income tax, please contact the Tax and Customs Administration.