If you live in Germany and receive 90% of your income from the Netherlands, file a tax return!
If you live in Germany and receive at least 90% of your (employment or pension) income from the Netherlands, it is probably to your advantage to file an income tax return in the Netherlands.
Firstly, it is necessary to determine whether you meet the 90% requirement to qualify as a non-resident taxpayer. Secondly, I will explain why it may be to your advantage to file a tax return. Thirdly I will present an example to illustrate and, lastly, I will end with my conclusion. For a more detailed discussion of the issues involved, please see my earlier blogs.
Qualifying non-resident taxpayer status
First and foremost, you must qualify as a non-resident taxpayer. Persons residing outside the Netherlands who qualify as Dutch taxpayers are entitled to the same tax advantages as Dutch residents.
- you must live in the EU, EEA, Switzerland or the Caribbean Netherlands,
- more than 90% of your income must be subject to income tax in the Netherlands, and
- you must submit an income statement issued by the tax authorities in your country of residence.
Partners can meet these criteria individually or jointly.
Obtaining an income statement from foreign tax authorities is not always as straightforward as it may seem. The 90% requirement refers to taxable income as defined in the Netherlands. This is problematic for foreign tax authorities.
Note: this requirement may be reformulated because it conflicts with European law. However, legislators have yet to introduce a bill.
The advantages of qualifying as a non-resident taxpayer
If you meet the 90% requirement, you are entitled to the same tax advantages as Dutch residents.
The main advantage is the right to claim tax relief on mortgage interest payments on a property outside the Netherlands used as a personal residence. Tax-deductible expenses for home ownership can result in sizeable income tax refund in the Netherlands.
Another significant (and possibly additional) advantage is the ability to claim tax credits. However, you only have the right to do this if you qualify as a non-resident taxpayer. From 2019, employers and benefits agencies shall no longer be allowed to apply for tax credits (other than the employed person’s tax credit) for foreign workers or benefit recipients, this will be a major advantage.
An example to illustrate
A single person living in Germany receives a single person’s state pension from the Netherlands (€14,000) and an annuity of €10,000 from a company pension scheme.
In the years up to and including 2016, the Netherlands only had the right to tax the state pension. From 2017, under the terms of a new double tax treaty with Germany, the Netherlands also has the right to tax income received from company pension schemes. Since the pension benefit received from the Netherlands exceeds €15,000, benefits agencies in the Netherlands are required to withhold tax and national insurance contributions.
Assuming the person living in Germany has no other income or assets, 100% of their income is derived from the Netherlands. So they qualify as a non-resident taxpayer. This is proved by the income statement mentioned above. If the person files a tax return in the Netherlands, they are entitled to claim tax credits, in this case the general tax credit, the elderly tax credit and the single-person’s elderly tax credit. The tax assessment will result in income tax refund of €1,330 (amount in 2017). So, in this case, it is clearly worth filing an income tax return in the Netherlands. If the person does not file a tax return (and does not apply for the required income statement), they are not entitled to the €1,330 they would otherwise receive. This is something we can help you with.
Determine whether at least 90% of your income is taxed in the Netherlands. If so, filing a tax return in the Netherlands may result in a significant tax advantage.
If you have questions or would like advice on a specific issue, we are happy to help. For more information or if you have questions please contact:
+31 (0)314 369111
+31 (0)6 11274485