Property Tax for Expats In The Netherlands
Taxes when purchasing, mortgaging, owning and selling a property in the Netherlands.
The Netherlands remains a strong location for relocating expatriates looking to work abroad but not move too far from home.
The welcoming nature of the Dutch, the many similarities in working practices and day-to-day life in the Netherlands, and the fact that there are incentives to encourage skilled foreign workers to remain, all mean that considering purchasing a home in the Netherlands is something that many expats do.
So, if you’re planning on moving to live in the Netherlands you can either rent a place or buy a property. As you are probably interested in getting the best value for money out of your ultimate decision, tax on Dutch property will play a role in your decision. This article gives you a good and helpful overview of taxes and housing in the Netherlands.
When you are planning to live in the Netherlands you will need a place to stay obviously, and you can either rent a place or buy a home, and which option is most beneficial for you depends mainly on how long you intend to stay in the Netherlands. Having said that, depending on where you’re perhaps thinking of buying, the rental market in areas of high population density and employment can make a good long-term investment too. So, even if your sojourn to the Netherlands is likely to be brief, a property commitment may still make sense for you.
If not, then renting a place is a good option when you really only intend to stay in the Netherlands for a couple of years or when it is uncertain how long you will be staying. Buying property is in general beneficial when you plan to stay in your Dutch housing for more than a couple of years because of the taxation implications of a purchase and also a resale.
When you rent a place in the Netherlands the only tax you will have to pay with respect to your housing is tax for the collection of garbage, the maintenance of the sewage and the water treatment. This is similar to your council tax commitment in the UK.
When you buy property in the Netherlands you will also have to pay this tax, and you will be subject to Dutch real estate transfer tax and Dutch property tax. But there is also a very attractive Dutch income tax incentive that you can benefit from as an expatriate purchaser…so don’t be put off by your tax commitment from first glance!
When buying a property in the Netherlands the purchaser has to pay 2% Dutch real estate transfer tax on the purchase price. Thus, when you buy a Dutch property for EUR 200,000 for example, you will have to pay EUR 12,000 Dutch real estate transfer tax.
When you own Dutch property you are subject to Dutch property tax. The rate differs per municipality and is currently between the 0.05% – 0.3% depending on where you live. Dutch property tax is levied per annum on the fair market value of your Dutch home.
When you buy a property in the Netherlands you can benefit from a Dutch income tax incentive. This incentive allows interest paid on a loan that has been used to acquire Dutch real estate, (e.g. a mortgage), to be deducted for Dutch income tax purposes. This means that the Dutch tax you pay on your salary is reduced because of the deductible interest on your mortgage loan.
However, Dutch property is also deemed to generate income. This income is a fictitious amount and is a percentage of a maximum of 0.55% of the fair market value of the property.
So, say for example you borrow EUR 200,000 to buy your Dutch property and your mortgage interest rate is 5%, the annual interest of EUR 10,000 is deductible for Dutch income tax purposes – but EUR 1,100 is deemed to be taxable income for Dutch income tax purposes. This results in a real net deduction of EUR 8,900 per annum.