Deductions when living in the Netherlands with income from abroad
Do you have income from abroad? Then please read the information under 'Living and working outside the Netherlands'.
If you live in the Netherlands, you must state your worldwide income in a Dutch tax return. Your worldwide income is your Dutch and non-Dutch income combined. You declare both incomes in the Netherlands, but this does not mean that you always have to pay income tax on both in the Netherlands.
Read more under I have income from 2 countries - do I pay tax in both countries?
The Netherlands has tax treaties and arrangements with many countries. These treaties state which country may levy tax on certain income. However, if you have income from a country without a treaty with the Netherlands, you do not automatically have to pay income tax on this in the Netherlands. You will then be entitled to taxation relief.
Read more under Treaties
In order to prevent you from paying income tax on the same income in several countries, you can obtain tax relief in the Netherlands in order to avoid double taxation. You will see the amount of your deduction when you file your tax return.
Read more under I have income from 2 countries - do I pay tax on the same income in both countries?
You are a resident tax payer if you live in the Netherlands. If you have non-Dutch income, you may be eligible for tax relief in order to avoid double taxation.
You are a non-resident taxpayer: no deduction
Are you a non resident taxpayer, or a qualifying non-resident taxpayer? In that case, you cannot receive a double tax relief. In your tax return, only enter your income that is taxed in the Netherlands. For Dutch income on which you do not have to pay tax in the Netherlands, you can request exemption in your tax return.
If the tax relief in order to avoid double taxation is higher than the actual tax, then the ‘transfer arrangement’ or ‘carry over rule’ applies.
How does the transfer arrangement (carry over rule)work?
The double tax relief may not exceed the income tax in a box. If you state a deduction item in your tax return, but this deduction item does not give you a tax advantage, you can make use of the transfer arrangement.
You will receive a decision from us stating the amount of your foreign income that will be included in the calculation of the deduction in a subsequent year. You can have more than one decision: for example a decision for box 1, and a decision for box 3.
As soon as you file your tax return for 2018, we will automatically apply the transfer arrangement. You no longer need to apply for this scheme yourself. If you wish to apply for the transfer arrangement for an earlier year, you will still have to apply for it yourself. Send a letter to your tax office and indicate for which box(s) you want the transfer arrangement.
You can request the amount available for the transfer scheme in writing, in a letter to your tax office.
Example of how the transfer arrangement works in box 1
Calculation of the double tax relief in box 1: Your income consists of € 27,226 income from earnings in Germany € 4,536 in negative income from being a homeowner. Your taxable income from work and home (box 1) then amounts to € 27,226 € 4,536 = € 22,690. You then have to pay € 944 in income tax.
For your income from earnings in Germany you owe tax in Germany and in the Netherlands to avoid double taxation you are entitled to a rebate. In this case the rebate to avoid double taxation would amount to € 27,226/€ 22,690 x € 944 = € 1,133. But since you only have to pay € 944 on your taxable income, the amount of the rebate will only be € 944, as this is the maximum amount of the rebate.
In this example, the negative income from your owner-occupied home does not lead to a tax advantage. That is why this amount (€ 4,536) is reserved. Should you have income in box 1 in the future on which you have to pay income tax in the Netherlands, a double tax relief will still be given on the reserved amount and you will receive a tax refund. This is called the transfer arrangement or carry over rule.