There are two things that you as a person and a Dutch person "must" do: breathe (logically) and pay taxes. The latter is something we all like to complain about and we would rather not see the infamous blue envelope fall on the mat. The tax authorities' slogan has been for years: "We can't make it more fun, but we can make it easier." In other words: no matter how hard you try, you won't get under that tax. Time to take a closer look at how much tax we actually pay in the Netherlands.
Let's start with one of the biggest frustrations of many Dutch people: the income tax. We all feel that we work (partly) for the state and that we have to pay a large part of our wages. And every year we hold onto our hearts what the government has come up with to make us pay more. But is it true that we pay most of our hard-earned money? The amounts and percentages that we mention here apply to the working population. The rates are different for people who are now entitled to AOW! The income tax in the Netherlands is not the same for everyone. Or rather, it uses a progressive tax system where the following applies: the higher the income, the more tax must be paid. In 2019 this will look like this: Tax bracket Taxable income Tariff 2019 Tariff 20181< € 20.38536,65%36,55%2> € 20,284 < €34.30138,10%40,85%3> € 34,300 < €68.50838,10%40,85%4> € 68.50751.75% 51.95% The rates for tranches 2 and 3 are the same. Yet these are two separate disks, which gives the government the opportunity to make a distinction in the future. The rates can be adjusted every year. And that also happens, and not only in a negative sense, as many people may think. In 2018 the rates in tranches 2, 3 and 4 were higher, tranche 1 was increased by 0.1% in 2019, as you can see in the table above. Effectively it means that someone with an income of € 100,000 is basically the pays the following in tax: 36.65% on € 20,384 = € 7,47038.10% on € 48,123 = € 18,33551.75% on € 31,493 = € 16,298 Total: € 42,103 or 42.1% on his / her income
Tax credits and deductions
Almost nobody pays the full tax as mentioned above. That is simply because almost everyone can use tax credits and deductible items. Tax credits are amounts that are exempt from income tax. Examples are: General tax credit, depending on your income. Maximum of € 2,477, with an income of € 68,507 or more, this is € 0 Young disabled person's discount, € 737 (if you qualify for this of course) Life-course leave discount (if you withdraw money from a blocked account for, for example, a pension to pay for leave): € 215 depending on your income. A maximum of € 3,399, with an income of € 90,710 or more, this is € 0. The tax credits are therefore primarily intended to reduce the tax burden on Dutch people with an average and less than average income. You do not have to pay income tax on the aforementioned amounts, which means that the total tax amount is lower and therefore also the percentage that you pay over your income. Deductions are costs that you incur that the government thinks you do not have to pay income tax on. , or at least less. You can therefore effectively pay this from your gross wage, and tax is levied on what remains. Examples of deductible items are: Donations to charities Donations to children (if the conditions are met and with a maximum amount) Study costs Travel costs Mortgage interest in a house to buy Naturally, all deductions apply to all deductions to be entitled to this. That is why it is good to delve into this thoroughly. if it appears that you are incorrectly or incorrectly entering a deductible item and you are being checked by the tax authorities, you may have to pay back the benefit. It is seen as a form of fraud. Are you in doubt? Then call in an expert.You pay income tax on your income, whether you are employed or self-employed. The amount depends on your gross annual income
Are you an independent entrepreneur? For freelancers, the profit from the company is your income. And on that you pay the same tax as someone employed. The tax credits and deductible items also apply to self-employed persons without employees. In addition, a small entrepreneur can make use of extra benefits, especially in the first years of entrepreneurship: if you are an entrepreneur for income tax purposes and meet the hour criterion (1225 per year), you are entitled to a self-employed person's allowance of € 7,280. self-employed deduction and you have just started. Then you may apply the starters' allowance up to 2 times (within a period of 5 years): € 2,123 as a self-employed person you are entitled to an SME profit exemption: you do not have to pay income tax on 14% of the profit. of) declare your business expenses as a deductible item, since you yourself have to take care of your pension, you have a pension gap and you may declare costs for pension accrual as a deductible item. And so it is that if you make a profit in the first few years of your entrepreneurship if your income is modal (€ 34,000 per year), you hardly have to pay income tax. As a self-employed person, just like someone in paid employment, you do have to pay the Income-related Healthcare Insurance Act contribution; this is immediately calculated for you on the tax return. Here too, the following applies: if in doubt, get the help of an expert!
VAT (value added tax)
In addition to income tax, we pay indirect tax on virtually everything we do. The majority of this comes from VAT, value added tax. You pay VAT on all services and products that you buy, with some exceptions. We have two VAT rates in the Netherlands: high (21%) and low (9%). These were previously lower, since 2001 this was 19% and 6%. In 2012, the high VAT was already raised to 21% and from 1 January 2019 we will pay 9% for the low rate. The low rate is basically intended for items that are directly or indirectly among the basic necessities of life, such as food. But also books and rabbit food fall under the low rate (and guinea pig food is not, because rabbits are eaten, although these days you will not find Flappie in the pan anymore, and guinea pigs will not). Agricultural products also generally have the low rate, just like flowers and plants. The high rate is for almost all other products, call it "luxury goods." Although clothing in general is one of the basic necessities, the high rate does count for this. The government also determines which products receive which rate. We also have a 0% rate, this applies to, among other things, export products, ships and aircraft, the supply of ships and aircraft and excise goods. We will come back to the latter later, because as a consumer you simply pay VAT on this! 0% goods are not the same as products that are exempt from VAT. Some real necessities of life are exempt from VAT. Think of prescription drugs, education, medical assistance, banking and the rental and sale of real estate (houses for example).
How much VAT does an average family pay per month?
On average, regardless of composition, a household spends around € 400 per month on groceries. Assuming that almost all of this goes at the low VAT rate, a household pays around € 40 in VAT on those groceries. An average household spends € 200 a month on energy, water and heating costs. Energy and gas is calculated at 21%, water at 9%. That means that you spend less than € 40 on VAT on your gas, water and electricity bills. And you also pay energy tax on this!In addition to VAT, you also pay energy tax on gas, water and electricity. For water that is 43.3 cents per cubic meter, for gas 29.313 cents per cubic meter and for electricity that is 0.9863 cents per kWh. These are the rates in the lowest consumption class, within which most households will stay. Based on an average consumption, this extra tax for a household comes to around € 800 per year. In other words, € 67 per month. An average household spends between € 150 and € 200 per month on clothing. That means that about € 30 to € 40 per month is paid in VAT on that clothing. A vacation is spent between € 3300 and € 3800 per year, which means € 700 to € 800 tax. Based on the latter, that is again € 67 per month. We also have subscriptions to television, (mobile) telephony, gyms, (digital) magazines and newspapers etc. You all pay 21% VAT on this. On average we spend between € 100 and € 150 per month on this, or € 20 to € 30 VAT. Only the "fixed" charges and expenditures means that as an average household you spend € 275 per month on VAT and energy tax. And then we have not yet included all variable expenses, such as meals, gifts, your Starbucks coffee and your car. The latter is in any case a separate category, but more about that later.
Your car and the tax
A car is, as long as it is not an electric car, a real dairy cow for the government. With a car it seems as if tax is levied on tax. And that's a bit like that. I already wrote an extensive article about all the costs involved in purchasing and driving a car. A brief summary … When purchasing a car you pay 21% VAT here anyway in the Netherlands. But that does not stop there, the government also applies a BPM (Taxation of Passenger Cars and Motorcycles). The amount of the BPM depends on the emission of a car and can amount to many tens of euros.The BPM calculation consists of two parts: a fixed amount and a variable based on emissions. In other words, you pay tax twice on a new car: VAT and BPM, and this can go pretty well. But it doesn't stop there. Driving a car is also expensive, thanks to the tax rules in the Netherlands. This is how you pay motor vehicle tax. For an average middle class car that comes to around € 50 a month. But where a lot of money disappears in the state treasury when you drive your car, is when you refuel. The consumer is charged 21% VAT on the fuel. In addition, the government charges 43% excise duty on petrol. It is actually called consumption tax and is intended to discourage certain things (such as driving apparently). In the meantime, the state treasury is just incredibly tasty. An average household nowadays has two cars. Let us assume a middle class (€ 50 tax per month) and a smaller shopping cart (€ 25 tax per month). An average of € 200 is charged per month with these two cars. That means € 85 excise duty and € 40 VAT for the state treasury. In total, those two cars cost € 200 in taxes.Your car is one of the most expensive costs when it comes to taxes. Not only do you pay a lot to the state about the purchase, you also sponsor the government every month.
If you think you've had everything, there are always some other taxes that we don't think about. For example insurance tax, which is calculated on insurance, with the exception of health insurance. The latter is tax-free. The insurance tax for insurance (such as liability, household effects, building, travel and car insurance) is 21%, just as high as VAT. On average, a household spends € 1500 in insurance premiums per year, of which € 260 is tax. That amounts to € 22 per month. Do you have savings or investments? And does that capital exceed € 30,000 per person? Then you have to pay wealth tax on this. From now on this will also be in installments, because the Tax Authorities are of the opinion that a higher capital also means a higher return, and you pay capital tax on the (notional) return. However, an average household has less than € 30,000 in savings, so an average family pays little or no wealth tax. After all, we are, after all, Onetime, just to name the Gaming Tax. You do not pay VAT on your bets and winnings with games of chance, whether in a casino or with a lottery, for example. You do have to pay on winnings above the € 450 gaming tax. In 2016, € 2.5 billion was deployed. How much profit there was unfortunately not known. We do know, however, that in 2016 the government received an amount of 482 million euros in gambling tax. That is about a fifth of what has been invested. In addition, there are more "exotic" taxes that an average family does not have to deal with every year, such as partnership, dividend, inheritance and gift tax. You pay transfer tax when buying a house, and import and export duties are charged for import and export. As an entrepreneur, you pay the VAT received (minus the VAT paid) as sales tax.
Not only does the national government take advantage of everything you do, the local government also shakes you a few more euros out of your pocket. The municipal taxes consist of three parts: property tax, property tax. This is a tax that the municipality charges on a property. If you rent a property, you do not pay property tax, only homeowners and tenants of non-residential property receive an assessment. The property tax depends on the WOZ value of the home (Value Real Estate). The average property tax is 0.13% of the WOZ, which is € 248,000 on average. A household with its own home therefore pays an average of € 322 to property tax. But the differences in the Netherlands are large, so this is really an average! This is a charge that you pay for the use of the sewer and the possibility to offer waste. On average, a household pays € 287 a year in waste tax and € 169 sewer tax Dog tax: you have to pay dog tax for your furry friend in most municipalities. On average this costs € 75 In other words, a household (with a dog) pays on average € 850 in municipal taxes and levies per year. That is € 71 a month.In most municipalities you also pay tax on your four-legged friend
You spend this on average per month on 'fixed' taxes
What you pay in tax is different for everyone. It depends on the amount of your income but also your expenses. However, we do want to show how much you spend on average per month on taxes. For this, we have assumed an average household that: has an average income of € 34,000 per year and is unable to enter a special deductible item for tax purposes; average municipality with a WOZ value of € 248,000 has average expenses in terms of groceries, clothing, energy, etc. Such an average household, which does not exist, pays per month in taxes: income tax: € 766 VAT & energy tax: € 275 taxes for car: € 200 insurance tax: € 22 municipal taxes: € 71 Total: € 1,334 Naturally, all kinds of variables such as maintenance of the car, expenses for all sorts of other things such as gifts, extras, dinner parties, an evening at the casino etc are not included. The total amount is therefore more likely to be around € 1,400 or € 1,500 per month, depending on the variable expenses. But the above are the expenses that every average household has monthly or annually. In total, an average household therefore spends around 50% of its gross income on taxes, directly and indirectly. I think that's a pretty surprising outcome, if I may be honest! I do not actually know whether I had expected more or less, but that it would be about half had not occurred to me.