Tax: The Taxman Cometh
2024/02/07 | By Bianca Pellet | Photo by Mathieu Stern
Taxation in the Netherlands
So, you’ve just arrived in the Netherlands and may be wondering how to navigate the thorny forest of taxation, particularly if you are a privileged individual holding diplomatic status or similar. This article will focus on the implications for you and your partner as they relate to employees of international organisations or personnel tied to diplomatic and consular missions.
Your first steps should be to familiarise yourself with the Protocol Guide for International Organisations (edited by the Dutch Government) which contains useful information, as well as with any agreements (such as a host agreement) your organisation may have with the Dutch Government (the latter will, for instance, regulate the privileges and exemptions of the different categories of personnel, as well as arrangements for social security).
Tax regulations in the Netherlands: The basics for high income earners
There is a wealth tax that is applicable from 57,000 euros for an individual and 114,000 euros for a couple (2023). It is a complex calculation based on the expected returns, with some debts (such as your mortgage) being deductible. Income is taxed at a higher rate than in other countries; for instance, the tax rate on income above 73,031 euros is 49.5%. However, companies are taxed less than in other countries to attract investment and create employment.
So, how should you navigate these tax considerations? The 30% ruling is definitely an advantage, as is a tax-free salary from an international organisation. Nevertheless, you should not make any assumptions regarding your personal situation and be sure you speak to a tax advisor. Similarly, when it comes to filing your tax returns (whether as a single person or as a couple), this, too, can be done by a tax advisor, and it is advisable to have one if you do not speak Dutch and/or have a tax exemption, as the system can be difficult to navigate otherwise.
Employees of international organisations (IOs) often benefit from tax exemption. Some employees of IOs are also exempt from VAT and duties on petrol. The exemption of the tax on motor vehicles (BPM) with CD, BN and GN number plates is also a considerable advantage.
However, this serves a purpose-according to international law, it is not to benefit individuals, but to ensure the efficient performance of IOs by providing guarantees of independence. Note, though, that this is limited to income from your job: if you have income from other sources, such as renting out an apartment overseas, it is taxed according to the wealth tax rules. As such, you will need to declare any other sources of income, as well as any Dutch benefits claimed (such as the kindertoeslag, or child benefit). Eligibility for such benefits may depend on a variety of factors, including overall household income and whether your partner works for a non-international organisation.
Partners may also benefit from a different exemption called the 30% ruling, which is applied when they are recruited from 150km away from the Netherlands (in a straight line, or ‘as the crow flies’), in order to do certain jobs that require their specific skill set (e.g. teaching). The assumption is that you will be earning at least 39,000 euros per year (source: www.belastingdienst.nl). The 30% ruling means you only pay tax on 70% of your income, and while this benefit currently lasts for 5 years after your arrival in the Netherlands, until recently it lasted eight years, so don’t rely on this time period staying at the level of five years in the future.
As well as tax exemptions, there are other financial benefits that allow international organisations to be competitive with multinational companies. Essentially, somebody working for a company would need a much higher gross salary to earn the same net salary as an employee of an international organisation. Salaries are also (partly) adjusted for inflation yearly. It is clear that the benefits are substantial for employees of international organisations. These are in place to attract talent to the Netherlands and specifically to come to a country where they have no prior connections or family.
These financial benefits are also intended to reduce the relatively expensive cost of living in the Netherlands, which some newly-arrived expats may find quite high compared to where they were living previously. In particular, the housing crisis is problematic, leading to a shortage of housing as well as increased costs of what is available (this applies to both renting and buying). Childcare costs are also not small and can see you paying over 2,000 euros per month, per child under four years of age, for full-time care (KDV, or kinderopvang), even if you are in receipt of the kindertoeslag (child benefit). Similarly, childcare costs for after-school club (also known as BSO, or buitenschoolopvang), can come to over 1,000 euros per month per child for five days of after-school club per week (though this does include all-day holiday clubs that run during half terms as well). A further challenge can arise from the fact that some expats are also not aware of the rules and fall for arguments from dishonest estate agents (such as making you believe you signed a binding agreement when you have just expressed interest). As is the case anywhere, never assume that the rules are the same as in your own country.
Transparency and equity: should such privileges even exist?
To an extent, the level of compensation at international organisations is public. Having this many international organisations is also a conscious strategy from the Dutch government which has sought to attract them–and clearly many people working for international organisations would not be there if the privileges did not exist, due to the challenges outlined above. International organisations would have to draw from a much smaller pool of potential employees and there would be arguments that they are too tied to the host country (i.e. that international organisations would end up with mainly Dutch employees, when this perhaps doesn’t align with the ethos of most international organisations). For context, only 1% of households in the Netherlands have net incomes above 100,000 euros per year (source: Centraal Bureau voor de Statistiek), although it is unclear whether it includes privileged persons. Many Dutch households have, however, benefited from increased property prices and in general do benefit from the dynamic economy which results from the presence of international organisations and their employees.
Final words of advice
Overall, these arrangements are clearly advantageous for most employees of international organisations (except, perhaps, for people coming from countries where there is more income disparity). The quality of life in the Netherlands is also self-evidently high thanks to its outdoorsy lifestyle, safe and effective infrastructures which are regularly renovated, significant numbers of green spaces and playgrounds, and a culture which prizes a good work-life balance. This is all despite—or perhaps at least partly because of—the high cost of living. As such, with regular consultation with a tax advisor of your choice, and frequent consultation of the Protocol Guide for International Organisations, you too can enjoy life in the Netherlands despite having to untangle all of the rules and regulations regarding your stay here. Welkom in Nederland en geniet van jouw verblijf!
About the author
Bianca Pellet studied at the University of Exeter where she earned a BA in English and Classics, and at Oxford, where she earned a Master of Studies in General Linguistics and Comparative Philology. Bianca currently teaches English Language and Literature at the International School of The Hague.
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