The Dutch tax system

The Dutch Government is responsible for the administration of education, justice, policing, road construction and maintenance. It also provides social security benefits, care for the elderly and subsidies for housing and for the arts and culture, among other things. Government expenditure is largely financed from tax revenues. Most of the proceeds from social security contributions are spent on social security and health care. The Tax Administration is responsible for tax collection and social security contributions.

 

Tax collecting

The Tax Administration collects through different channels.

 

Wage tax


The most important one for employees is the wage withholding tax. Everyone in the Netherlands who is in paid employment is subject to wage tax. The employer that pays the wages withholds the tax and pays it to the Tax Administration. These taxes consist of one amount made up of taxes and social security contributions. Social security contributions must be paid for the AOW (old age pension), ANW (surviving relatives benefit) and AWBZ exceptional medical expenses.

 

The wage tax is an advance tax payment for the income tax. In this way, it is prevented that taxpayers have to pay a single large payment for income tax and social security contributions once a year. The employer withholds the wage tax at the time the employee receives his/her salary.

 

Income tax


Persons who have an income pay income tax. Individuals may receive income from different sources. Income tax takes into account the origin of the income and distinguishes three categories. These categories are known as boxes. The income in each of the three boxes is taxed at a different rate. The total of the tax owed in the three boxes is the income tax payable. 

 

Please check the website of the Tax Administration for more detailed information about the tax rates for different origins of income. 


Other ways of collecting taxes by the Tax Administration are through:

 

  • Direct taxes:
    -
    Corporate income tax
    - Dividend withholding tax
    - Inheritance tax
    - Tax on games of chance 
  • Indirect taxes: 
    - Value added tax
    - Excise duty
    - Taxes on legal transactions
    - Environmental taxes
    - Tax on passenger cars and motorcycles
    - Motor vehicle tax 
    - Import duties
    - Consumption tax for non-alcoholic beverages and other products
    - Tax on heavy goods vehicles 

Other governmental bodies who levy taxes

Alongside the central government, three other governmental bodies are permitted to levy taxes. These are the provincial, the municipal, and the water authorities. The provincial authorities impose a number of environmental taxes. Examples of municipal taxes are property tax and the dog licence fee. The water control authorities mainly levy taxes relating to water pollution. When compared with the total revenue from taxation, the contribution made by provincial, municipal, and water control authority taxes is marginal: less than 4% of the total tax revenues.

 

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