If you are a new expat in the Netherlands, Dutch taxes can be a bit overwhelming. A lot of different types of taxes, rules, and regulations. This blog is a brief overview and explanation of the taxes you (probably) need to pay as a freelancer or self-employed professional in the Netherlands. We will also show you how we can help you.
Which taxes do you need to pay?
If you are going to work as a freelancer or self-employed professional, you probably need to pay VAT tax and income tax. When you are starting your business, you need to follow some important steps.
First of all, you need to register at the Chamber of Commerce (KvK). You will then be automatically registered at the tax authorities (Belastingdienst). The Belastingdienst will determine if you are an entrepreneur for the purposes of turnover tax and income tax and will inform you about this. It is possible that you are an entrepreneur for VAT, but not for income tax.
Value-added tax (VAT)
We have written an English blog about VAT tax before, so if you want to know all the ins and outs about VAT, make sure you check out this blogpost.
Another significant tax you (probably) need to pay is income taxes. As we mentioned before, the Belastingdienst will inform you about this. However, we will quickly explain when you can expect to be an entrepreneur for the purpose of income tax.
You are most likely an entrepreneur for the purpose of income tax, if:
- Your activities are conducted in an economic setting;
- You can expect to make a profit;
- You work independently and at your own risk.
Income taxes are divided into three categories, so-called boxes. It is possible that you need to pay tax in all three boxes, but it is also possible that you need to pay tax in only one box. It depends on the type(s) of income you have. Each box has its own rate.
The three boxes are as follows:
Box 1: income tax for work and home ownership
- Salary, tips, business profit
- Benefit, pension, annuities, and maintenance payments
- Income from abroad
- Income earned as a freelancer, childminder, artist, or professional athlete.
The tax percentage in box 1 is until a taxable income of €69.399, 37,07%. Above €69.399, you need to pay 49,50% tax.
Income taxes in box 1 are paid over your taxable income. Your income can be reduced with different deductions, for example deductions especially for starters or small businesses. Since these deductions are lowering your income and therefore the amount of tax you need to pay, it is highly recommended to have a close look at all possible deductions. This can be complex, so we highly recommend getting advice from professional bookkeepers or to completely outsource your income tax returns.
Let’s say, your taxable income is €75.000 in 2022.
For the first €69.399, you need to pay 37,07%. That will be €25.726.
For the €5601 (75.000 - 69399) that is left, you need to pay 49,50%. That will be €2772.
The total amount of tax due is €28.498.
This is of course a lot of money, but you can spread the payment of the income taxes over the year. This will be explained later in this blog.
Note: these percentages change every year (slightly) and differ for people who are already retired, or are going to retire in that particular year.
Box 2: financial interest in a company
If you have a substantial interest of at least 5% directly or indirectly in another business (or together with your tax partner), you need to pay tax in box 2.
In 2022, the tax percentage for box 2 is 26,90%.
Box 3: savings and investments
The first €50.000 (or €100.000 together with your tax partner) of savings and investments is tax free. So, if you have €55.000 in box 3, you only need to pay tax for €5.000. In 2022, the percentage is 31%. This means that you need to pay €1550 tax for €55.000 in savings & investments (31% over €5.000).
National insurance premium
Besides income taxes there is also a national insurance premium (premie volksverzekeringen). Freelancers need to pay this through their income tax declaration, and it will be calculated with a percentage of your taxable income. The percentage you have to pay depends on, for example, your age and changes every year slightly.
This sounds like a lot of money and difficulties, right? Keep on reading, we have some good news incoming!
You can request a provisional assessment for your income tax returns, this will be sent in December or January for the new year. The provisional assessment consists of the estimated income taxes and national insurance premium you need to pay that year. You will then pay a part of your income taxes and national insurance premium every month, and therefore you don’t have to pay everything at once at the end of the year.
Keep in mind that this is only a provisional assessment and that it can be changed during the year, for example because of the purchase of a house (keep in mind that you have to declare this to the Belastingdienst yourself) or if your yearly income is higher or lower than expected. In March-April you need to do your income tax declaration for the year before. This will result in a final assessment which states the definitive amount of taxes you need to pay. If the definitive assessment differs from the provisional assessment, you need to pay either more taxes or you will receive too much paid taxes back.
Do you think the taxes in the Netherlands are too complicated?
If yes, we understand that. Therefore is Tellow helping expats, freelancers, and self-employed in the Netherlands with their taxes and the rest of their bookkeeping. With Tellow software you can, in one easy app, do your invoices, quotes, VAT declaration, and more. You can also completely outsource your income tax returns to our bookkeepers. The app and website are available in English, and, if you still have questions, our English speaking customer service team and bookkeepers will help you out. Make sure you check it out!