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Netherlands: Personal Taxation

Individual Non-Resident Taxation

Residence is determined in accordance with an individual's principal place of residence and what the tax courts call "durable ties of a personal nature". Durable in this case means the closeness of the tie rather than the length of the stay.

Whilst Dutch personal tax rates are high, non-residents receive more favorable tax treatment.

Non-residents are only taxed on certain sources of Netherlands income. It should be noted that the following sources of Dutch income are not taxed in the hands of the non-resident individual:

  • Real Estate: No capital gains tax is levied on the profits realized on the sale of Dutch real estate owned by a non-resident individual unless the non-resident is engaged in a trade or business in Holland and the real estate is one of the capital assets of the business. (N.B. Rental income is, however, taxable in the hands of the non-resident individual).
  • Interest on a Loan Secured on Dutch Real Estate: Interest repayments on a loan provided by a non-resident individual which is secured on Dutch real estate are tax free in the hands of the recipient. Furthermore in Holland there are no withholding taxes on interest payments.
  • Sale of Shares: any capital gains realized by a non-resident individual on the sale of shares in a Dutch registered company are tax-free unless the non-resident individual has a "substantial interest" in the company. At the time of writing, to have a "substantial interest" in a Dutch company an individual must alone or together with his wife have held 5% of the issued nominal share capital. (N.B. Furthermore under the provisions of some tax treaties a non resident individual who has a "substantial interest" in the shares of a Dutch registered company will only be assessed on profits from capital gains arising on the sale of his shares if at some stage in the last 5 years he was resident in the Netherlands).

 

 

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