Living outside the Netherlands with an income from the Netherlands; it can certainly pay off to file a tax return!
Do you live outside the Netherlands, but receive an income from the Netherlands? Not receiving an invitation to file a tax return from the Dutch tax authorities is bound to feel good. However, there are times when it’s certainly worth your while to file tax returns in the Netherlands. If you don’t, you could miss out on potentially substantial tax refunds.
I’ve set out several situations below in which it will always be worth considering whether it’s desirable to act. For the sake of practicality and readability, this list is not exhaustive.
Children under 12
If you work in the Netherlands and have children under the age of 12, you can use the income-dependent combination tax credit by filing a tax return. This tax credit is income-dependent and amounts to a maximum of €2,835. You will miss out on this annual tax credit by not filing a return.
If you work in the Netherlands and live in a privately-owned home with a mortgage in Europe, you can deduct the mortgage interest from your income when you file the tax returns. The most important criterion is that 90% of your income must come from the Netherlands. The mortgage interest relief means that you can recover up to 49% of the tax deduction relating to your own home if you file a tax return.
If you receive 90% of your income from the Netherlands, there are some other deductible items in addition to the mortgage interest relief. These include paid alimony, donations, certain non-reimbursed medical expenses and study fees.
Working in the Netherlands
If you live in Germany and work in the Netherlands, your employer may no longer take the tax component of the general tax credit into account after 2019. You can still obtain this credit of €609 by filing a tax return in the Netherlands (from 2019 onwards).
Pension from the Netherlands
If you are single, live in Germany and receive a pension from the Netherlands of more than €15,000, the benefits agency will no longer be able to take all tax credits into account from 2019 onwards. You can expect an income tax refund of €1,582 if you file a tax return, this being the general tax credit of €609, the senior’s tax credit of €767 and the single senior’s tax credit of €206.
The same applies to annuity payments or social security payments from the Netherlands.
If the Dutch pension that benefits the resident of Germany amounts to less than €15.000, the Netherlands has no right to levy tax at all. However, a deduction will usually be withheld regardless, so you need to take action to recover the tax unduly withheld.
Partner has no Dutch income but does have deductible items
If your partner does not have a Dutch income, he or she will not be able to make use of a deductible item in the Netherlands for income tax purposes. However, if your Dutch income is lower than €34,300 (2019 amount), you can use the social insurance component of your partner’s deductible item.
By filing a tax return, you can still claim your partner’s deductible item for the social insurance component and receive a refund of 27.65% of the tax-deductible item.
Part of the annual income from the Netherlands
If you receive part of your annual income from the Netherlands, the deductible item will be based on an expected Dutch annual income. As the levy is progressive, the deduction will generally be too high for a partly Dutch annual income. You can obtain an income tax refund by filing a tax return.
I have given a number of examples where it could be worth filing a tax return in the Netherlands. Specific cases must be assessed in greater detail on a case-by-case basis.
This information by no means covers all the situations in which filing a tax return leads to a tax refund. If you are in doubt as to whether you are eligible for a tax refund, please feel free to contact us.
For more information or if you have any questions, please contact us:
R.W.M. te Kaat
+31 6 – 11274485