NETHERLANDS - Non-resident tax payers in the Netherlands / changes in the tax credits starting 2019

April 2019

In most countries a tax free amount is applicable on income which means only a part of the income is subject to tax. In the case that an individual’s income is lower or equal to the tax-free amount, no tax will be paid.

The Netherlands uses a different system, instead of tax free amounts they use tax credits. The amount of the tax credit is dependent on the actual circumstances of the tax payer and could decrease the amount of tax due.

There are several different tax credits, such as general tax credit and labor tax credit. These credits should be taken into account by the employer for payroll purposes.

As from 1 January 2019, reduced tax credits will be taken into account when calculating the wage tax for non-resident taxpayers; this means that the amount of wage tax may be higher. The maximum monthly reduction is Euro 51 for persons who have not yet reached the retirement age, and Euro 132 for persons who have reached the retirement age. The final amount depends on the personal situation of the individual.

For payroll purposes there could be 3 categories non-residents fall into:

Persons living outside the EU, EEA, Switzerland and the BES-Islands (Bonaire, Saba and Sint Eustatius) are no longer entitled to tax credits.
Persons living in the EU, EEA, Switzerland and the BES-Islands (Bonaire, Saba and Sint Eustatius) are entitled to labor tax credit.
Persons living in Belgium, based on the tax treaty between the Netherlands and Belgium, are entitled to both labor tax credit and general tax credit.

Please note however that under these conditions all persons could claim tax credits via their individual income tax return.

Robin Schalekamp
robin.schalekamp@bdo.nl