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Dutch Tax Calculator
Thinking about relocating to The Netherlands? Here are all the important rules about the Dutch income tax system.
This article summarizes the important facts about the Dutch tax system by explaining the taxation rules and outlining the options that one can benefit from. We also provide a practical example of different income tax calculations so that one can clearly understand how the income tax works.
Taxes in The Netherlands
The Netherlands is very well known for life satisfaction, safety, health insurance, work-life balance, and overall quality of life. This is very well aligned with the fact that the Dutch income tax is one of the highest in the world and that an average resident taxpayer contributes a large part of their salary to the state funds. The Dutch pay tax rates between 36% and an extraordinary 52% on their gross income.
Dutch income is usually taxed by the tax rules that are determined by the source of the income. For instance, a tax resident can pay taxes based on one or more of the following categories.
Class 1: taxable income from employment and home ownership
Class 2: chargeable income from a substantial interest
Class 3: taxable income from savings and investments
Most people pay Class 1 tax as it relates to the most common form of employment (salary or wage). Also, Dutch taxpayers very often invest in real estate (due to the favorable Dutch mortgages), which makes Class 1 the most important for our further explanation.
Dutch Income Tax
Dutch salary is taxed by using a progressive taxation system. This taxation system is based on annual gross income and can be illustrated via staircases – the more money one is making per year, the more annual tax one pays.
For the purpose of understanding the Dutch income tax calculations, we outline the following example.
If we imagine for a second that there is competition in carrying the weights while climbing the staircase, one could potentially set the following rules.
- The initial 8 stairs one must climb with 5kg weights
- The stairs of numbers 9, 10, and 11 must be climbed with an additional 6kg weight (5kg + 6kg in total)
- The stairs 12, 13, and 14 with extra 10kg weights (5kg + 6kg + 10kg in total)
- The stair 15 with extra 20kg weights (5kg + 6kg + 10kg + 20kg in total)
The weights in our illustration are equivalent to the tax rates and the staircase to one’s gross income per year. Therefore, if someone’s starting personal income is EUR 20,000 per year, the person is going to pay around 35% in taxes on it.
If the person gets a pay bump to EUR 25,000 she will pay roughly a 35% tax rate on the initial EUR 20,000 plus 40% on EUR 5,000 (gross salaries EUR 40,000).
In 2024, the tax rates are as below.
- A tax rate of 36,97 percent applies to income up to 75.518 euros
- A tax rate of 49,5 percent applies to income over 75.518 euros
Tax refunds are issued once per calendar year (typically in June) for the previous year.
During this period, the Dutch tax advisor is determining if a person paid too much or too few taxes in the previous year and can consequently ask for additional payments or issue tax credit in terms of payback.
There is also another type of tax advantage that concerns residents with the status of “skilled migrant”.
These payers receive tax deductions by having their initial 30% of gross income as tax-free capital (exemption from taxation).
The third tax benefit one can obtain relates to purchasing a real estate property in The Netherlands. This tax relief comes in the form of reducing the tax base for all the costs related to the ownership transfer – roughly 7% of the price (real estate agent, bank, etc.).
Due to these tax refunds, there are many people applying for residence in The Netherlands, especially due to the 30% ruling and favorable conditions of Dutch mortgages.
Tax Benefits: 30% Ruling Explained
The 30% ruling is a tax advantage for highly skilled migrants moving to the Netherlands for work. This ruling is an allowance towards the extra costs that international employees might incur when moving to a new country, often referred to as “extraterritorial costs.”
Under the 30% ruling, the employer is allowed to provide a tax-free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax. This means that the employee only pays tax on 70% of their gross Dutch salary.
To qualify for the 30% ruling, both the employer and the employee must meet certain conditions:
- Recruitment from Abroad: The employee must be recruited from another country by a Dutch employer, or the employee must be sent from a company abroad to a Dutch company.
- Specific Expertise: The employee must have specific expertise that is not or is scarcely available in the Dutch labor market. This is generally determined by the employee’s salary level. For 2024, the salary threshold is €38,961 (after application of the 30% ruling) or €55,658 (before application of the 30% ruling). For employees under 30 with a master’s degree, the salary threshold is lower.
- 150 Kilometer Rule: The employee must have lived more than 150 kilometers from the Dutch border for more than 16 months in the 24 months before their employment in the Netherlands.
The 30% ruling can be granted for a maximum period of five years. This period can be reduced if the employee has stayed or worked in the Netherlands in the past.
The 30% ruling also provides for tax-free reimbursement of the costs for an international school for the children of the employee and the possibility to opt for partial non-resident taxpayer status, which can result in substantial tax savings.
It’s important to note that the application for the 30% ruling must be filed within four months after the start of the employment. If the application is filed later, the ruling will be granted from the first day of the month following the month in which the application was filed.
How To Use The Income Tax Calculator
Our personal income calculator provides an overview of the net salary (net salaries) that one receives after all the tax rates are applied. The tax calculator can be used by following the steps below.
1) Fill in your gross income per year by scrolling left or right
2) Select the year of taxation rules and check the tax benefit that applies to you.
The Dutch income tax calculations that we provide are made to provide as accurate tax rate calculations as possible. However, it can be understood only as an approximation of one’s real tax rules, and no rights can be derived from it.