Of course, you do not have to fill in the rates on your tax return. Those are known to the tax authorities. But it is of course nice to understand how the final amount of your tax return is calculated.
Proportional rate
The tax rates for income from substantial interest (box 2) and income from savings and investments (box 3) are simple. They are proportional, meaning you pay the same rate on every euro of income in these boxes.
On your income in box 2, you pay 25% income tax. For example, income in box 2 comes into play when your BV pays dividends to you (the BV has then already dividend tax withheld). Or when you sell substantial interest shares.
PLEASE NOTE: the Rutte III cabinet plans to increase the rate in box 2 to 28%,5 (from 2021, with an intermediate step in 2020: 27,3%). We suspect that before this rate hike comes into effect, a few more BVs will be shaken empty.
The rate for income in box 3 is 30%. The tax is calculated on the return you are deemed to have realised on your Box 3 assets (second home, savings, investments and the like). This return is determined at a flat rate on the reference date (January 1). The Rutte III cabinet has no plans to change this rate. However, the Cabinet, partly on the orders of the tax court, must make the calculation of the fixed return in box 3 more in line with the returns actually achieved. How exactly that will be shaped is not clear at this stage.
Progressive rate
A progressive rate applies in Box 1. This means you pay more tax the higher your income. This proceeds in steps, also called rate brackets. For 2017, the rates in box 1 for someone not yet entitled to a benefit from the AOW are:
| Income above: | Income up to: | Tax | Premiums | Total | |
| Disc 1 | € - | € 19.982 | 8,90% | 27,65% | 36,55% |
| Disc 2 | € 19.982 | € 33.791 | 13,15% | 27,65% | 40,80% |
| Disc 3 | € 33.791 | € 67.072 | 40,80% | 0,00% | 40,80% |
| Disc 4 | € 67.072 | 52,00% | 0,00% | 52,00% |
For state pensioners, a lower contribution rate applies in brackets 1 and 2. These people would otherwise pay premiums for the benefits they receive themselves (e.g. the AOW). The contribution rate for an AOW recipient is: 9,75% (instead of 27.65%). You will find all rates in the free booklet Fiscal Figures.
Are you not insured in the Netherlands for national insurance (because you do not live in the Netherlands, for example)? Then, of course, you do not pay contributions, only tax.
In our article Division between tax partners we explained to you that you have to choose that division in such a way that you make the best use of the rates (i.e.: the deductions at the highest possible rate; the income at the lowest possible rate). NOTE: the distribution of income and deductions can also affect your tax credits.
Cipher
So how exactly do you calculate the tax and contributions due? A calculation example, for someone, who is not yet entitled to AOW and who is liable to pay contributions in the Netherlands. The income in box 1 is € 82,500. The income tax due in 2017: €34,539.
| Rate | Income | Tax | |||
| Disc 1 | 36,55% | * | € 19.982 | = | € 7.303 |
| Disc 2 | 40,80% | * | € 13.809 | = | € 5.634 |
| Disc 3 | 40,80% | * | € 33.281 | = | € 13.579 |
| Disc 4 | 52,00% | * | € 15.428 | = | € 8.023 |
| € 82.500 | € 34.539 |
Simple?
Yes, but you're not really there yet. Before you have found the amount, which you have to pay or may receive back on your assessment, you have to do some more sums. You may be entitled to offset foreign (withholding) tax. From the total income tax (tax box 1 + tax box 2 + tax box 3), you still have to deduct the tax credits (we will explain these credits in a subsequent article). And you credit the wage tax deducted from your salary, as well as the dividend tax deducted from Dutch dividends. Finally, you offset the amount you have already paid or received on your provisional assessment.