Tax relief on mortgage interest if you live outside the Netherlands
If you earn your income in the Netherlands but live outside the Netherlands in a property on which you have a mortgage, you may be eligible for tax relief on mortgage interest in the Netherlands. For this to apply, you need to meet certain tax-related conditions.
These are discussed below.
Qualifying non-resident taxpayer status
Firstly you must qualify as a non-resident taxpayer. On 1 January 2015, the category of ‘qualifying non-resident taxpayer’ was added to Dutch law. Persons residing outside the Netherlands who qualify as Dutch taxpayers are entitled to the same tax advantages as Dutch residents. The main advantage is the ability to claim tax relief on mortgage interest payments on a property outside the Netherlands used as a personal residence.
• 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 may meet these criteria individually or jointly.
Obtaining an income statement from foreign tax authorities is not always as straightforward as it might seem. We have found that Italy and Spain, in particular, do not recognise the form and either fail to complete it or submit it late.
In our experience, the income statement presents difficulties in terms of implementation. The 90% requirement refers to taxable income as defined in the Netherlands. This is problematic for foreign tax authorities: To assess a person’s taxable income correctly, they have to be conversant with Dutch tax laws. Take “Box 3” income (income from savings and investments) for example. Let’s say you have a bank balance of €100,000 in the Netherlands. The fact that 4% (€4,000) of it is treated as foreign income makes it more difficult for you to meet the 90% requirement. However, if, rather than a bank balance, you have a holiday home worth €100,000 in the Netherlands, €4,000 is treated as income subject to income tax in the Netherlands. This is because the convention for the avoidance of double taxation assigns the right to tax a bank balance to the country of residence and the right to tax a property to the country where the property is situated.
Conditions that apply to the mortgage
Since 2013, tax relief is possible only on interest on repayment mortgages repaid over a maximum of 30 years. This requirement does not apply to mortgages arranged prior to 1 January 2013, which are covered by a transitional arrangement. As of 2015, status as a qualifying non-resident taxpayer is the only requirement for tax relief on interest payments on mortgages arranged prior to 2013.
In 2013, it also became compulsory for the mortgage holder to submit the details of the mortgage to the Dutch tax authorities. This is because, unlike banks established in the Netherlands, foreign banks are not obliged to submit these details of their own accord. Failure to provide the details of the mortgage will mean that you are not entitled to tax relief on mortgage interest.
So, if you live outside the Netherlands and want to claim tax relief on mortgage interest in the Netherlands, it is important to choose a mortgage that meets the conditions that apply in the Netherlands.
Interest-only mortgages arranged after 1 January 2013 do not qualify, nor do the savings-linked mortgages popular in Germany.
Unfortunately, it turns out that many people have this type of mortgage. The entirety of your income may be subject to income tax in the Netherlands, but if you have a savings-linked mortgage you cannot claim tax relief on mortgage interest in the Netherlands.
If you live outside the Netherlands and qualify as a non-resident taxpayer, you may be able to claim tax relief on mortgage interest payments through your Dutch tax return. Depending on your personal situation, this may mean a tax refund of thousands of euros. Mortgages arranged after 2013 must meet certain conditions to be eligible.
If you have any questions or would like advice on your particular situation, we will be happy to help. Please contact:
R.W.M. te Kaat
+31 314 369 111
+31 6 11 27 44 85