General rule: you pay income tax in the country where you live.
Exception: you pay income tax on income from specific sources in the country where the income was earned.
Living abroad
Most people are quite clear about where they live. Yet tax residence is a frequent topic of discussion with the tax authorities.
Your tax residence is where the centre of your social life is. It is where you play sport, meet your friends, go to church or the mosque, where your family lives, where your children go to school, and so on. It therefore depends entirely on your specific circumstances.
Income from Dutch sources
If you live abroad, only certain types of Dutch income are taxed in the Netherlands. Broadly speaking, this includes the following types of income:
- profits from a company established in the Netherlands;
- wages from employment carried out in the Netherlands;
- profit from other activities in the Netherlands;
- periodic payments, provided that the contributions have been deducted in the Netherlands;
- income from a substantial interest in a company established in the Netherlands;
- income from immovable property situated in the Netherlands.
Income not mentioned in this list is not taxed in the Netherlands if you live abroad. For example, if you live in Germany and work in the Netherlands, your wages are subject to Dutch payroll tax and income tax. However, your bank accounts are not taxed in the Netherlands, even if you hold them with a Dutch bank. These do not form part of the basis for your income from savings and investments (Box 3). Your holiday home on the Zeeland coast is a property situated in the Netherlands. This is subject to tax in the Netherlands.
Double taxation
If you receive income from abroad, there is a risk that both countries may wish to levy tax on that income. That is, of course, not the intention. That is why the Netherlands has concluded tax treaties with a large number of countries. These treaties contain provisions to prevent international double taxation. For countries with which no treaty has been concluded, it may Decision on the avoidance of double taxation are applied. Specific rules apply within the Kingdom.
Qualifying foreign taxpayer
As you only pay tax in the Netherlands on specifically designated income, as a taxpayer resident abroad you are not entitled to tax reliefs (such as tax credits and the mortgage interest deduction). You may only claim these if you are a qualifying foreign taxpayer. You can read about the conditions you must meet in our article Foreign taxpayer – 2015 income tax return. The form for declaring that 90% or more of your income is taxed in the Netherlands can be found here.
C-bill
If you live abroad for the whole year, you must file your tax return in the Netherlands using a C form. In the year you move abroad, you must submit an M form. You use the same form in the year you return to the Netherlands.
In most cases, you can submit the C form online. If this is not possible, the Tax and Customs Administration will send you a paper copy on request (Tax Helpline for Overseas Residents: +31 555 385 385). You can submit an M form online applications.
Premiums
This article is about income tax. If you live abroad, you must also check whether you are covered by the Dutch social security schemes. Not being covered, of course, means that you do not pay any contributions. The rules on compulsory insurance are separate from those on tax liability. If you live in another European Union country, you should consult the relevant regulation. The Netherlands has a social security agreement with a small number of countries outside the EU.