Understand your entitlement to the various tax credits and allowances in the Netherlands...
In general, tax liability is a result of a calculation which includes all applicable tax credits. Please note that tax credit consists of an income tax section and a social security section. People who are not covered by the Dutch social security system are not entitled to the social security section of the tax credit. The only exemption to this rule is labour credit.
General tax credit
Every tax resident and every employee working in the Netherlands is entitled to the general tax credit.
- €0 - € 2,254 (2016: € 2,242) for a full year for someone who has not reached his or her retirement age (the ‘AOW’-age)
- €0 - € 1.151 for anyone at or above the retirement age
The retirement age that should be applied varies according to an individual's birth year. The Dutch government website SVB offers an online AOW age calculator
- Income between €0 - € 19.982 (2016: € 19,922) : Maximum tax credit of € 2,254 (2016: € 2,242)
- Income between € 19.983 - €67,068 (2016: € 66,417) : € 2,54 - 4.787% x (taxable Box 1 income) - € 19,82
- Income above € 67,068 (2016: € 66,417): The tax credit will be nil
The employer takes the general tax credit into account in the monthly payroll calculations.
Residents have a right to labour credit if they have one of the following types of income:
- Salary or wages from current employment
- Income derived from trade or business
- Income from other activity
Employers take the labour credit of employees into account in their monthly payroll calculation. In the other two scenarios, the tax office calculates the labour credit when calculating the tax liability.
The amount of the labour credit is:
- € 3,223 for 2017 (2016: € 3,103) for a full year for working people who have not reached their applicable retirement age (AOW). See the Dutch government online calculator for more details on individual retirement age
- €0 - €1,645 for those who have reached retirement age
- No labour credit is given when income is above € 121,972 (2016: 111,590)
The cap applied to the labour credit is income dependent; when the income is above € 32,444 (2016: € 34,015) the tax credit is reduced.
It is also possible to receive additional tax credits depending on personal circumstances.
Examples of additional credits are:
- Income-dependent combination tax credit (maximum € 2.778) (2016: € 2,769)
- Old-age tax credit (maximum €1.292) 2016: € 1,187)
- Supplementary old-age tax credit for singles (€ 438) (2016: € 436)
Fiscal partners are people who are one of the following:
- Registered partners
- Living together and registered at the same address at the local municipality and one of the following applies:
- have a notarial cohabitation agreement;
- jointly owned primary residence;
- entitled to each other's pension plan; or
- living together with your partner and with a minor child of you and/or your partner
It is possible for fiscal partners to mutually divide some of the common income and deductions; for example income from the primary residence and personal deductions. Consequently the partner with the highest income can claim a higher deduction and tax advantage. It is also possible for a partner with no or low income to claim a refund based on the general tax credit.