Taxes for non-residents

up or down?

Tax changes in 2019

2019 brought about many changes in tax regulations. We already wrote about some of the changes that will affect everybody in the Netherlands. This article deals with the very specific changes that will mainly affect foreigners in the Netherlands.

In short, foreigners who are residents in the Netherlands keep all tax credits and deductions, such as arbeidskorting and heffingskorting. If you don’t know what these tax credits are, check our article Taxes and Overtime in the Netherlands.

Unfortunately, non-residents, depending on their home country, lose the right to some or all tax credits and deductions on income tax.

Am I a resident or a non-resident?

I live and work in the Netherlands, so I must be a resident, right? Not exactly. According to the legal definition of a resident, living and working in the Netherlands is not enough. Furthermore, even if you have registration with a Dutch municipality, you still might lose some of the tax deductions.

According to Dutch government you are a resident in the Netherlands

  • if you have a permanent place of residence in the Netherlands. This means that you not only have to have private accommodation, but also registration in a Dutch town hall.

and

  • if your social and economic life takes place in the Netherlands. This means, among other things, that you have a Dutch bank account or phone subscription, but also that your spouse (wife or husband) and kids live in the Netherlands. In case of single and childless people, intentions and future plans count. You are a resident if you intend to stay in the Netherlands permanently and build your financial and social life here.

You are not a resident

  • if you are not registered in the municipality

or

  • if your family still lives in your home country, your children go to school there and you have bank accounts and financial commitments abroad.

I am a non-resident. What does it mean?

In the eyes of the Dutch tax authority, Belastigdienst, there are 3 groups of non-residents

  1. Dutch residents
  2. People registered with a Dutch municipality, but with their social and financial life taking place in one of the European Union countries, Norway, Lichtenstien, Iceland, Swirzerland or Carribean Netherlands.
  3. People who have registration with a Dutch municipality, but their social and financial life takes place in any other country.

As a member of the first group, you have the right to all tax deductions. If you happen to fall in to the second group, you keep arbeidskorting, but no heffingskorting. The third group lose the right to both arbeidskorting and heffingskorting.

In the end, unless you you have registration in a Dutch town hall and your lifestyle indicates that you are going to stay in the Netherlands for good, you will pay bigger taxes this year.

Is it as bad as it seems?

No, it is not. There is some good news too. Heffingskorting and arbiedskorting, the two biggest tax credits possible in the Netherlands, consist of two components: deduction on your income tax and deduction on the social insurance premiums. In other words, what you see on your payslip as loonheffing is both the income tax and social insurance premiums that are obligatory for every worker in the Netherlands.

Non-residents lose only the right to deductions on income tax, but keep the right to deductions on the social insurance premiums.

It is difficult to predict how much tax exactly you will pay, so it’s best you keep an eye on your payslip (here’s our article on how to read your payslip) and ask your employer for clarification if necessary. In the end, if you get charged too much tax on your earnings, you can still get it back in the yearly tax return.