DUTCH TAX CONSEQUENCES

When you are trying to decide whether to rent or to buy a house in the Netherlands, there is an important matter to take into consideration: what will the tax consequences of your decision be? This is a complex affair, and it might have a significant bearing on which type of home you opt for. There are pros and cons to both living arrangements, and a lot comes down to your individual circumstances. We will review the tax consequences of buying and renting on this page. Learn about how your mortgage, the value of your property, and your residency status all effect your tax liability in NL!

If you require more detailed information, take a look at our page about ‘Dutch Legal and Financial Matters‘.

Tax-Deductible Mortgage Expenses 

There are several positive tax consequences, that come from buying a house in the Netherlands. The most important reason to buy, rather than rent, is that the interest you pay on your mortgage will be deductible. However, this does come with a few riders:

• In order for the interest you pay on your mortgage to be deductible, the mortgaged property must be your principle place of residence
• In 2014, the rules on deductibility changed
• The maximum rate of deductibility went up to 50%
• This is currently decreasing by half a percent per year
• It will continue to fall until 2041, when it reaches 38%

Tax-Deductible One-Time Expenses

You will have to make several one-time payments when buying your house. These are related to your mortgage, but are not part of your interest payments. Some of these are also tax-deductible. They include the:

• Part of the civil law notary fee, which is related to your mortgage deed
• Cadastral registration fee
• Bank fee
• Appraisal fee
• Leasehold

Non-Deductible Expenses

There are, of course, some negative tax consequences of owning real estate in NL as well. Certain expenses are not tax deductible. For example:

• Some buyers choose to take out a mortgage that is higher than the cost of their property. This enables them to finance the buying process, and any construction that needs to be done on their house. The part of the mortgage interest, which has been used to finance these ‘extras’, will not be tax-deductible
• There are several other expenses, related to the property, that will not be deductible either. These might include things like insurance premiums and capital repayment

Mortgage Legislation Developments in NL

Over the past few years, the Dutch government has been re-evaluating its mortgage legislation. The following developments have been made:

• The maximum rate of deductibility has been lowered
• Mortgage interest is now deductible over a maximum period of 30 years
• In order make your repayments for this maximum period of time, your mortgage must provide monthly redemption payments. These can be straight line or annuity payments
• The maximum sized mortgage available is being reduced by 1% per year
• Right now, in 2018, it is down to 100% of the purchase price of a house
• Consequently, buyers are no longer able to completely finance the additional expenses related to buying a house, with their mortgage
• This means that they have to bear these extra costs themselves

Choosing a Mortgage in NL

For more detailed information on this subject, have a look at our page on ‘Taking out a Mortgage in the Netherlands‘.

Here are a few pieces of advice to take into account when making your decision:

• Whatever your personal situation, seek professional advice!
• This is especially important, given that you may only need a mortgage for a limited period of time
• What’s more, if your mortgage is linked to a capital insurance, you may face additional tax consequences
• If you are benefiting from the 30%-ruling, speak to your bank

If you own a house and use it as your principal place of residence in the Netherlands, this will affect how you have to fill out your tax-return:

• You must report a percentage of the value of your house on your tax-return form
• This percentage is called the ‘eigenwoningforfait‘, which means: ‘deemed rental value’
• The deemed rental value is based on the official value of your house
• The official value of your house is also known as the ‘WOZ-value’ in the Netherlands

The ‘WOZ-Value’

• ‘WOZ’ stands for ‘Wet Waardering Onroerende Zaken‘, or ‘Value of Immovable Property Act’
• The WOZ-value is calculated annually by your municipality
• Every year, a home-owner will receive a so-called ‘WOZ-beschikking’
• This roughly translates a ‘WOZ-decision’
• This decision ‘confirms’ what the value of their house is
• This value is used as a basis for determining a number of the home-owner’s levies and taxes
• This is intended to ensure that the system is fair
• Owners used to assess the value of their house for tax purposes themselves, which led to some miscalculations
• The general rate of the deemed rental value of a property is 0.75% of its WOZ-value
• A higher rate applies to houses that are worth more than € 1.06 million

Buying a House with a Spouse, or Partner 

How do you cover the aforementioned expenses, if you own a house with your spouse or partner?

• The balance of the deemed rental value, and the interest, can be deducted from your income
• If you are married, or if you and your partner are considered fiscal partners, you can organize your mortgage deductions in a way that will give you the highest possible tax relief
• If your partner does not live in the Netherlands, then you can generally deduct only your own share in the mortgage
• Consider whether it would be beneficial for both you, and your spouse/partner, to be treated as resident taxpayers of the Netherlands

In the Netherlands it is possible to receive a tax refund on your mortgage interest deduction every month. In order to receive the refund, you must:

• Request a preliminary negative tax bill from the Dutch tax authorities
• You can make this request by filling out a special form 
• On receipt of this form, the tax authorities will deposit the refund directly into your bank account

Tax refunds on mortgage interest deduction also vary, depending on whether your real estate is located abroad or in the Netherlands.

Real Estate Owned Abroad

If you are a resident taxpayer of the Netherlands, and you own property abroad:

• The negative income from your real estate, which is located outside the Netherlands, is not deductible
• This is because the Netherlands is not your principal place of residence

If you carry out work in the Netherlands, but you are a non-resident taxpayer living abroad in your principal place of residence:

• You can choose to be treated as a resident taxpayer of the Netherlands
• This will enable you to deduct the mortgage interest (reduced with the deemed rental value) from your Dutch taxable income
• We highly recommend that you approach a specialist for advice, if you are considering this course of action
• Whether or not it will save you money depends on your unique situation. You risk suffering some negative consequences if your calculations are erroneous!

Real Estate in NL, Owned by Non-Residents

If you do not live in the Netherlands, but you own real estate here:

• You will have to pay tax on a ‘deemed benefit’ that arises from your real estate, minus the value of your mortgage
• This ‘benefit’ is set at 4% of the market value of your real estate, less the debt (i.e. the mortgage)
• The tax rate is 30%
• Your mortgage interest will not be deductible
• Each partner has to report his or her own share of the benefit
• If you rent out the real estate, your rental income will be free of tax
• Any expenses incurred from the property will not be tax-deductible
• If you have only left the Netherlands temporarily, different rules will apply to you
• We recommend that you seek expert advise if you are in this situation

• Unfortunately, renting a house in the Netherlands is expensive!
• Rental properties in the western part of the country, and those close to international schools, are especially pricey
• There are no tax breaks available for renting a house in Holland
• With any luck, your employer will choose to compensate you for your rent payments and other housing-related costs
• This may sound like a great deal, but beware
• If your employer is willing to cover your rent, you could be subject to more taxes

Taxable Free Housing in NL

Any compensation for housing provided by your employer constitutes taxable income, if you are a:

• Resident of the Netherlands
• Partial non-resident taxpayer
• Resident taxpayer

Benefiting from the 30%-Ruling in NL

If you are a resident of the Netherlands, or a partial non-resident taxpayer:

• You might receive ‘free’ housing from your employer
• In principle this ‘special treatment’ is considered a taxable benefit
• If you benefit from the 30%-ruling as well, a specific set of rules will apply to you
• Part of your rent may qualify as an ‘extraterritorial expense’
• This rent-portion can be compensated, tax-free
• This reduces the amount of your fixed 30%-allowance!

If you are a non-resident, living in the Netherlands:

• Any compensation you receive for double housing expenses is regarded as compensation for extraterritorial expenses
• The compensation will be tax-free
• This will, however, reduce your 30%-allowance