As a US citizen or Green Card Holder, filing US expat taxes from the Netherlands is only required if you meet the filing threshold. Secondly, understanding your expat tax obligation while living overseas is important because it helps you become fully compliant with the IRS.
We’ve broken down the essential expat tax info you need to know about living in the Netherlands in this post.
Expat Taxes for Americans in the Netherlands
As a US citizen or permanent resident of the United States, you’ll need to comply with your tax duty by filing US taxes to the IRS every year, no matter where you live.
In addition to regularly filing a tax return, you may need to report your foreign financial assets to FinCEN (part of the US Treasury) through the FBAR, under the FATCA law.
Factually speaking, the US government taxes its citizens worldwide yet offers unique tax benefits and provisions to help individuals avoid double taxation. These benefits include:
- Foreign Tax Credit: A dollar-for-dollar tax reduction that goes towards foreign-sourced income
- Foreign Earned Income Exclusion: This is also called the FEIE, in which expats can exclude up to $107,600 of foreign-sourced income from US expat taxes.
- Foreign Housing Exclusion: This exclusion allows expats to exclude certain household expenses that come from living abroad.
- Child Tax Credit: American families can receive $3,600 for each child aged five and under or $3,000 for each child aged six and over.
As an American expat, you’ll be able to grab these benefits with proper planning and use our best-selling expat tax software.
Who Qualifies as a Resident of Netherlands?
As an expat, your residency status is dependent on the following conditions:
- where your family home is
- you intend to stay long-term
- you work in the country
- where your permanent home is located
- if you are registered with a Netherlands local authorities
- economic or social ties to the country
- where bank accounts and assets are held
Most importantly, you are considered a resident if you are:
- married, and your family accompanies you to the country, or
- single, you stay in the Netherlands for a year or longer
If you have residency in the Netherlands, you are therefore a tax resident of the country too. That means you will need to file and pay Dutch taxes every year, just as you must do for the US.
Netherlands Taxes 101
As a US citizen abroad living in the Netherlands, you must pay taxes if you earn money living in the country. The Dutch tax office – called the Belastingdienst – is who you owe taxes to.
You can declare your Dutch taxes on an annual return online or with a tax professional as an expat.
Additionally, if you work in a company, your employer will withhold income tax from your salary (a.k.a. “wage tax”).
If you are a self-employed American living in the Netherlands, you will need to calculate and owe any due income tax through your annual return.
Netherlands Income Tax Rates
There are no state or regional states with the country of Netherlands – only national.
As part of the Dutch system, all types of income are separated into categories or “boxes,” which are then taxed at different rates.
Box 1 tax rates for 2021
If expats haven’t reached the state pension age in 2021:
|Annual taxable income (gross)||Total rate|
|€ 0 – 68.508||37.10%|
The types of income included from Box 1 are:
- Job and employment wages
- Business income
- Self-employment income
- Gratuities (tips) received
- Foreign Income
Box 2 then includes income generated from profit-sharing certificates and shares in which the taxpayer has more than 5% interest. Such income is taxed at 26.90%.
Box 3 includes savings and investment income (which also includes real estate and investment portfolios). This is also the category where capital gains would be taxed; however, there are no capital gains in the Netherlands.
To continue, the value of one’s assets, excluding debts, are calculate once a year on January 1 to determine the net capital value. According to the Belastingdienst, everyone can have an amount of tax-free capital.
Netherlands Tax Deadline
January 1 to December 31 is the tax year for the Netherlands. Then, if you, as an expat are liable for Dutch income taxes, you’ll need to file a tax return for the Dutch Finance Ministry by April 1. Any taxes owed will be due after the date of your final tax return assessment, which is two months later.
If you decide to register with a Dutch tax professional to do your Netherland taxes, the Ministry will give you an extended deadline – up to one year after the deadline – for your Dutch return to be filed.
30% For Foreign Workers
With 30% facility, the 30% rule is for highly skilled foreigners moving to the Netherlands for a specific job. When the worker meets the conditions for the employer, the employer can give a tax-free allowance of about 30% off of the foreigner’s gross salary – subject to Dutch taxes.
This rule is intended to compensate for the extra costs the foreigner may face when moving to a new country.
Tax Treaty Between the US and Netherlands
The good news is that there is a tax treaty between the US and Netherlands that helps Americans abroad avoid double taxation. Double taxation happens when citizens are taxed from their country of origin and the current country they’re living in on their income within the same year.
Tax treaties can allow US citizens abroad to be eligible for:
- Exemption from US income taxes on specific items of income (from US sources)
- Being taxed at a reduced rate from particular items of income (from US sources)
Remember: If you owe US taxes, you’ll need to pay by April 15.
Foreign Income on Dutch Taxes
If you are a Netherlands tax resident, you will be subject to Dutch tax on your worldwide income. However, the US-Netherlands tax treaty does exempt you from specific types of income from Dutch taxation.
Netherlands Social Security for Expats
According to the Dutch government, all residents of the Netherlands must pay into the country’s social security insurance. However, due to the US-Netherlands Totalization Agreement, there are critical insights into which country social security would be paid into as an expat.
For example, if you’re directed to work in the Netherlands through a US company for less than five years, you can pay US Social Security. However, if you were hired by a Netherlands employer/company and work in the country for more than five years, you will need to pay into Dutch social insurance.
Additional Taxes in the Netherlands
There are a few other taxes an expat will need to pay in the Netherlands, in addition to income tax on salaries:
- Non-cash compensation: This includes housing allowances, provided services, and company cars are considered taxable
- Deceased Resident: If a resident of the Netherlands passes away in the country, any assets transferred at death become taxable and taxed at a progressive rate depending on the relationship between the heir and the deceased.
- VAT: Netherlands has a 21% value-added tax (VAT). Then, there are two additional special rates: 0% (certain goods and services) and 9% (books, groceries, etc.).
US Expat Tax Filing Requirements
As you may know, the US tax year runs from January 1 to December 31. Expats only need to file a tax return if they reach the filing threshold, which we explain in our expat tax guide.
The most important tax deadlines for Americans abroad are the following:
- April 15: Tax payment deadline if you owe taxes
- June 15: Filing deadline an automatic two-month extension for expats
- October 15: If expats requested an extension in July, this is the second extension filing deadline and is also the FBAR deadline
- December 15: Last day of the tax season to submit your tax returns before the new year
If the tax payment or filing deadline falls on a weekend/public holiday, it will be moved to the next business day.
Questions About Expat Taxes in the Netherlands?
Do you have more questions about filing US expat taxes from the Netherlands? Our friendly, expert human tax experts can help you and assist with your US tax filing within the country, too.
Be sure to file your US taxes every year with the first and most trusted expat tax software for Americans abroad. Get started today by signing up for a free account on MyExpatTaxes!