In the Netherlands, taxes are scaled according to income levels but are generally quite high. The fiscal year is the calendar year. Citizens have to report their income of the previous year, latest by March. The system integrates tax with fees paid for the basic old-age pension system AOW, the pension system for partners of deceased people AnW, and the national insurance system for special medical care AWBZ.
From 1 January 2001, there are three types of tax for taxable income. These types of income are brought together in three so-called boxes:
Tax rate for Box 1 (income from work and home) is a rising scale with four brackets. The rates are (2008):
A fixed rate of 25% is charged on income from substantial interest (Box 2)
A fixed rate of 30% is charged on income from savings and investments (Box 3)
Expats can expect a tax relief in the form of the 30 Percent Ruling. This is a personal income tax reduction for specialized foreign employees whose skills are scarce in the Dutch marketplace.
The 30 Percent Ruling compensates employees for the extra costs of their temporary stay in the Netherlands. It allows an employer to pay an employee a tax-free allowance of up to 30 percent of the employee's total remuneration (the "Basis") for the first 10 years of their stay in the Netherlands. In addition, the employer may also provide a tax-free reimbursement of the fees paid for the employee's children to attend an international school.
A similar ruling also applies to compensate Dutch employees who are assigned to work in designated developing countries.
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