Working Temporarily in the Netherlands
A frequently asked question is if this person has any tax obligations in the Netherlands and if it’s beneficial to file a Dutch income tax return.
Wage Tax Obligations
If you work temporarily in the Netherlands, you have Dutch-sourced income and must pay tax in the Netherlands, which is done via the wage tax. The wage tax is an advance tax payment for the income tax. In this way, it is prevented that taxpayers have to pay a single large payment for income tax and social security contributions once a year. The employer withholds the wage tax at the time the employee receives salary. Most times, the collected wage tax is sufficient. However, there are situations that too much wage tax is withheld by the employer, for example when employees enter the Netherlands during a tax year or temporary employees. In order to claim back the overpaid tax, a personal income tax return has to be filed.
Dutch Income Tax Returns
If you receive an invitation from the Dutch tax authorities to file your income tax return, you are required by law to file it. If you don’t do this, there is a risk that the tax authorities will issue penalties. If you don’t receive an invitation from the Dutch revenue to file the income tax return, an invitation needs to be requested in case it can be foreseen that Dutch income tax is due in a certain year. The chance is high that you can claim a tax refund for the year you entered the Netherlands. The same is applicable if you were not living in the Netherlands and worked for a short period of time here.
There are the following reasons for the tax refund:
- The calculation of the payroll tax is based on a yearly income. The payroll department is using tax rates which are applicable for a year. However, if you work less than a year, the tax rate is lower.
- Everybody who works in the Netherlands is entitled for a full tax credit. The payroll department takes into consideration for each month 1/12 of the tax credits (algemene heffingskorting / arbeidskorting). In case you did not work the whole tax year, you have not received the maximum tax credits yet.
Claiming a tax refund in the year you entered the Netherlands can be done by filing a personal income tax return (M-form).
The M Form
In a year when a person migrates to the Netherlands, a special form called M form (only available in Dutch) must be filed at the Dutch tax authorities. The M form shows a foreign period and a resident period. Based on whether or not a tax treaty exists, it can be determined if specific foreign income must be reported or not. The M form is not available online and can only be ordered at the Dutch tax authorities (tel.: 0800-0543).
If you are an InterNations member and would like to contribute an article, do not hesitate to contact us!