Residents of the Netherlands are subject to income tax on their total worldwide income. This means that income you received abroad should also be declared in the Netherlands. If you also pay tax on this income in another country, you will usually qualify for a credit against the income tax you owe, which is known as double tax relief. You are entitled to double tax relief if, for instance, you work in another country as a self-employed entrepreneur or an employee and have to pay tax on your income in that other country.
If the Netherlands has concluded a tax treaty with the country from which you receive income, you can find out the exact tax consequences by consulting that treaty. For an overview of the countries with which the Netherlands has concluded tax treaties, please refer to Overview of tax treaties. If there is no tax treaty between the Netherlands and the country concerned, the '2001 Double Tax Decree' will apply.
Special rules have been laid down for the calculation of the double tax relief. The point of departure in the calculation is the ratio between the income taxable in the Netherlands and the income not taxable in the Netherlands (the so-called proportionality method). The relief is calculated separately for each box. The double tax relief can never exceed the amount of tax owed in a particular box.
Example
Calculation of double tax relief in Box 1
Your taxable income from employment and home ownership (Box 1) amounts to € 22,690. On this amount, you owe € 944 in income tax in 2009.
Your income consists of € 27,226 in wage income from Germany and € 4,536 in negative income from an owner-occupied property. As regards the wage income from Germany, you will be liable to German taxation and entitled to double tax relief in the Netherlands. The double tax relief amounts to € 27,226/ € 22,690 x € 944= € 944. This is because the maximum deductible amount is € 944.
In this example, the negative income from an owner-occupied property does not result in a tax benefit. For this reason, this amount (€ 4,536) is reserved. If you have Box 1 income in the future that is taxable with Dutch income tax, double tax relief will be granted in retrospect with regard to the reserved amount and you will receive a tax refund. This is known as the deferral facility.
