The Dutch tax system can seem bewildering at first—three different "boxes" for different types of income, a wealth tax that assumes you earn money even if you did not, and a filing process that mixes online convenience with uniquely Dutch complexity. This guide breaks it all down for expats.
The Three-Box System
The Netherlands divides income into three categories, each taxed differently:
Box 1: Income from Work and Home
This is where most of your tax liability sits. Box 1 covers:
- Employment income (salary, bonuses, benefits)
- Freelance and self-employment income
- Pension income
- Social security benefits
- Income from your primary residence (mortgage interest deduction)
2026 tax brackets:
- Up to EUR 38,441: 36.97%
- EUR 38,441 to EUR 76,817: 36.97%
- Above EUR 76,817: 49.50%
Note that the first two brackets are effectively one bracket at 36.97%, but they are legally separate because different social security contributions apply. The top rate of 49.50% kicks in at around EUR 76,800—lower than many expats expect.
Box 2: Income from Substantial Shareholding
Box 2 applies if you own 5% or more of a company (a "substantial interest"). This covers dividends and capital gains from those shares. The tax rate for box 2 is 24.5% on the first EUR 67,000 and 33% above that.
Most expats who are employed will not interact with box 2 unless they own or co-own a company.
Box 3: Savings and Investments (Wealth Tax)
This is the most unusual part of the Dutch tax system. Rather than taxing actual returns on your savings and investments, the government assumes a "deemed return" and taxes that.
How it works:
- Your total assets (savings, investments, second properties) minus debts are calculated on January 1
- There is a tax-free threshold of approximately EUR 57,000 per person (EUR 114,000 for fiscal partners)
- Above the threshold, the government calculates a deemed return based on the split between savings and investments
- The deemed return is taxed at 36%
For savings, the deemed return has been relatively low (around 1.0-1.5%), meaning the effective tax rate on savings is around 0.36-0.54%. For investments, the deemed return is higher (around 5-6%), which can result in a meaningful tax bill even in years when your investments lost value.
Tip for expats with the 30% ruling: If you opt for partial non-resident taxpayer status, your non-Dutch assets are exempt from box 3 taxation. This can save significant money if you have savings or investments in your home country.
Key Deductions and Credits
The Dutch tax system offers several deductions that can reduce your bill:
- Mortgage interest deduction (hypotheekrenteaftrek): Interest paid on your primary home mortgage is deductible from box 1 income. This is one of the most valuable deductions in the Netherlands
- General tax credit (algemene heffingskorting): Everyone gets a basic tax credit of around EUR 3,362, which phases out for higher incomes
- Employment tax credit (arbeidskorting): An additional credit for people who work, worth up to approximately EUR 5,532
- Healthcare costs: Extraordinary medical expenses above a threshold may be deductible
- Charitable donations: Gifts to qualifying Dutch or EU-based charities are deductible within limits
Filing Your Tax Return
The Dutch tax year runs from January 1 to December 31. Tax returns for the previous year open on March 1 and are due by May 1 (extensions are available).
The process:
- Log into the Belastingdienst website using DigiD (your digital identity)
- Much of your return is pre-filled with data from your employer, bank, and other institutions
- Review and adjust the pre-filled data, add deductions, and submit
- You will typically receive your assessment (aanslag) within a few months
First-year tip: If you moved to the Netherlands partway through the year, you will file a "migration return" (M-biljet) instead of the standard return. This is more complex and may require professional help.
Common Tax Situations for Expats
- Double taxation: The Netherlands has tax treaties with most countries. If you are being taxed on the same income in two countries, the treaty should prevent double taxation—but you may need to claim relief actively
- Foreign income: If you earn income from abroad (rental property, investments, freelance work), you may need to report it in your Dutch return
- Leaving the Netherlands: When you leave, you file a final tax return. Any remaining 30% ruling benefits stop, and your box 3 position is assessed based on your assets on January 1 of that year
For most expats, hiring a tax advisor for at least the first year is money well spent. The Dutch system has enough quirks that professional guidance can save you from mistakes and help you claim all available deductions. After the first year, many expats feel comfortable filing on their own using the pre-filled online system.
Want to optimise your after-tax savings? See our savings account comparison and learn about the 30% ruling.