Tax

You pay income tax on your income. This may include wages from employment, profits from business activities and/or results from other income. Wage tax is already deducted from your wages by the employer. Your gross income is paid out net. This wage tax is actually an advance levy in respect of income tax. The tax to be paid on your income from business activities or other activities is calculated with the annual income tax return, which you submit yourself.

On the page ‘Tax on assignment/commissions’, we discuss how you can get paid for (short-term) commissions and assignments and the impact these different options have in terms of how much tax you pay, which deductible items you are eligible for and whether you have to pay national insurance contributions. 

Consumers pay turnover tax (VAT, valued-added tax) on their purchase when buying services or products. Entrepreneurs are responsible for collecting this for the Dutch Tax and Customs Administration (Belastingdienst). Turnover tax is not, therefore, revenue and not a cost item for entrepreneurs. This has nothing to do with income tax.

If you start a business, you must register with the Dutch Chamber of Commerce. The Dutch Tax and Customs Administration will determine whether or not you are liable to pay VAT based on your expected turnover. 

Legal entities that enter into competition with others or that are focused on making a profit must pay corporation tax. This applies to both private limited companies and public limited companies (bv’s and nv’s), as well as to foundations and associations.

The Netherlands has made agreements with many countries to avoid double levying of taxes. Look on the Dutch Tax and Customs Administration to see what the rules are for paying tax in the country where you are working. If you send an invoice, you must consider the rules regarding VAT in the case of assignments or commissions abroad.

As a private individual, you will often pay other types of taxes too. Examples include municipal taxes, such as property tax (Onroerende Zaak Belasting, OZB) for a home and/or waste collection charge (afvalstoffenheffing) and sewer charges (rioolheffing). People with a minimum income can apply for (partial) exemption with their municipality.

Other examples are gift tax (schenkbelasting), for anyone who receives a gift. There is a general exemption. You are allowed to receive this amount tax-free each year for each giver. You must pay gift tax on the excess. Higher exemption amounts apply to amounts that you receive from your parents. If you set up a crowdfunding campaign as a private individual and you receive a higher amount than the exemption from one person, you must also pay gift tax on that. If you receive a gift that is intended for a business, thus for your sole proprietorship or your foundation, for example, you pay no gift tax, but that amount is added to the profits.