Interest derived from debt-claims forming part of a substantial holding is taxed at the normal rate of income tax. Dividends and capital gains derived from the alienation of shares or from the redemption of debt-claims are taxed at a proportional rate of 25% in the income tax, insofar as this income exceeds the first two tax brackets. In case of a capital loss 25% of that loss may be offset against the tax which would otherwise be due. For this purpose an arrangement similar to that for the offsetting of losses is applicable (section 3.2.11). In case of emigration of the taxpayer the substantial holding is deemed to be alienated. However, the tax due will not be collected as long as the substantial holding is not disposed of. After the elapse of 10 years the remainder of the tax levied because of the deemed alienation at the time of emigration, is pardonned.
For non-residents the income from the substantial holding is only subject to tax in case of a substantial holding in a corporation wich is a resident in the Netherlands. With respect to non-residents a corporation is also deemed to be a resident of the Netherlands if it was resident in the Netherlands for at least five years during the last ten years. With respect to non-residents the substantial holding is deemed to have been alienated in case of the transfer of the place of effective management of the corporation from the Netherlands to elsewhere.
III. Net income from employment and services rendered outside employment
This income is comprised of all income other than business income that is received in cash or in kind from present and former employment, together with income derived from services rendered outside employment.
Income from present employment includes salaries, payments, gratuities, tips and certain periodic payments received under social security legislation (in cash), and the free use of a private car and free housing paid for by the employer (in kind). Income from past employment includes pensions, and invalidity, disablement and unemployment benefits.
Salaries, wages and certain periodic payments received under social security legislation are subject to the salaries tax. This tax is withheld by the employer, and is essentially an advance levy on the person's final income tax assessment (see 4.5.1).
Income from activities and services which does not qualify as income from business or employment is considered to be income from services rendered outside employment. To be regarded as income there must be a reasonable expectation that these activities will yield income. Examples are the provision of boarding for lodgers, and fees for services and copyrights.
In principle expenses incurred in connection with employment and the provision of services are deductible from the income derived from these activities. The deduction is equal to the actual expenses less reimbursements or, subject to upper and lower limits, 12% of the gross salary, whichever is larger. A fixed sum is tax-deductible for travel between home and work.
IV. Net income from capital
Net income from capital is comprised of all income from movable and immovable property and rights not related to goods. Only the yield from property and rights is taxable; the increase in the value of the assets is exempted. There is no capital gains tax in the Netherlands.
A special provision is applicable to owner-occupied property. The property is taxed at an imputed rental value, which represents the balance of the revenue and expenses connected with the use of a dwelling. This rental value, which is a positive amount, is assessed on statutory tables. As normal expenses are included in the imputed rental value, no expenses other than (mortgage) interest and ground rent may be deducted.
Interest and dividends received by private investors from designated credit or investment institutions which mainly participate in environmental projects are exempt from income tax.
Income from stocks and shares includes cash dividends, stock dividends and bonuses. The final payment to the shareholder following the liquidation of a corporation is regarded as a dividend if it exceeds the average amount paid on the shares concerned.
Notional dividends from foreign investment corporations and funds are income from assets, and are taxed accordingly. In principle the income from the latter is set at 6% of the market value of the shares.
A maximum allowance of NLG 1,000 is granted insofar as dividends subject to Dutch dividends tax exceed related expenses (including interest expenses). Under certain conditions the amount of the dividend allowance can be raised:
· for dividends received from specific private participation companies, the allowance is raised by a maximum of NLG 1,000;
· for dividends received in connection with employee savings and profit-sharing schemes, the allowance is raised by a maximum of NLG 1,000;
· For dividends received from specific participation companies which mainly participate in starting entrepeneurs (both natural persons and corporate bodies), the allowance is raised by a maximum of NLG 5,000. However, insofar as the corresponding interest allowance in connection with starting entrepeneurs is utilized, this amount of NLG 5,000 is reduced.
For married taxpayers the above mentioned amounts of the dividend allowance are doubled. The dividend allowance is not applicable with respect to dividends from a substantial holding in a corporation.
Interest is more than just the interest received from a debtor or bank. There are special provisions for taxation of the increase from the lower issue price to par value of zero bonds and deep discount bonds, and the notional interest on the bare ownership of rights and claims of which the temporary usufruct is divided.
A maximum allowance of NLG 1,000 is granted insofar as any interest received exceeds the interest paid in connection with sources of income and personal obligations. This is exclusive of the interest paid on a mortgage, which is related to the purchase or renovation of owner-occupied property. Under certain conditions the amount of the interest allowance can be raised:
· for interest received in connection with employee savings and profit-sharing schemes, the allowance is raised by a maximum of NLG 1,000;
· for interest received in connection with a subordinated loan to a starting entrepeneur of at least NLG 5,000, or interest originating from specific participation companies wich mainly participate in starting entrepeneurs (both natural persons and corporate bodies), the allowance is raised by a maximum of NLG 5,000.
For married taxpayers the above mentioned amounts of the interest allowance are doubled. Furthermore, the taxpayer is entitled to an additional interest allowance when his children under the age of 18 receive interest, up to a maximum of NLG 500 per child.
The interest component of a capital payment from a life insurance policy (and the investment income) is not taxed if the payment occurs because the person insured dies before the age of 72. The beneficiary is generally allowed the same exemption for payments upon the death of the insured person at or after the age of 72 if the premiums have been paid over a period of at least 15 years. Interest included in payments of up to NLG 62,000 on a fixed date is exempt from income tax if the annual premiums are paid over a period of at least 15 years. This is also applicable to interest included in life insurance payments of up to NLG 210,000 if the annual premiums are paid over a period of at least 20 years. Both exemptions are subject to the condition that the highest annual premium paid for the insurance may not be more than ten times the lowest premium.
Income from capital includes income from life annuities and other periodic payments resulting from either a lump-sum payment or the payment of premiums. These payments are liable to tax over the amount that the payments and the payments received in the past exceed the total premiums or lump sum paid under the policy.
V. Net income in the form of periodic payments
There are two categories of periodic payments, those which are classed as income from capital, and those which qualify as a separate source of income.
Periodic payments forming a separate source of income can be divided into different categories. Examples are:
· payments from the state, such as certain public scholarships and government subsidies;
· periodic payments under family law, such as maintenance payments, unless received from relatives once or twice removed;
· other periodic payments, claimable in court, unless received from close relatives, foster parents or members of the same household, such as maintenance payments to a former partner.
4.2.4. Non-source-related deductions
In certain circumstances payments which are not related to the acquisition of income may be deducted from the total gross income. These non-source-related expenses can be divided into three categories, which are personal obligations (special expenses), exceptional expenses and tax-deductible donations.
I. Personal obligations
The most important expenses which may be regarded as personal obligations are the following:
· premiums for several forms of life annuity payments, such as (temporary) disablement, old age and widows' annuities up to NLG 6.179 or, in certain circumstances, up to NLG 12,358 in the case of (married) couples. If certain conditions are met then this amount can be increased to NLG 86,480, if the provisions for the old age pension are inadequate in relation to current income.
· certain maintenance payments or lump-sum payments which replace these;
· interest on debts. Since 1997, the deduction of interest on debt is restricted. Insofar interest paid is not connected with a source of income, a maximum amount of NLG 5,291 is deductible. For married taxpayers, this amount is doubled. Certain exemptions are applicable.
· losses on specific loans. Under certain conditions a loss on a subordinated loan granted to a starting entrepeneur can be deducted up to a maximum of NLG 50,000.
II. Exceptional expenses
Resident taxpayers may deduct certain exceptional expenses from their total gross income. There are a number of categories of exceptional expenses, each of which has its own specific non-deductible component based on the taxpayers' gross income. For married couples the non-deductible component is calculated on the basis of their joint income.
The following categories can be distinguished:
· medical expenses and expenses related to disability and old age are tax-deductible when they exceed a certain percentage of the joint gross income, subject to specified upper and lower limits;
· expenses involved in the maintenance of children younger than 27 years of age;
· expenses involved in the support of certain relatives;
· expenses which are made in connection with study or training for a profession. Studies as a hobby do not qualify;
· expenses involved in child care, subject to certain conditions.
III. Tax-deductible donations
Donations to domestic religious, charitable, cultural and academic institutions or other bodies serving the public good in excess of 1% of the gross income may be deducted by resident taxpayers, with a lower limit of NLG 120. Donations in excess of 10% of the gross income are not tax-deductible. Provided certain conditions are met this restriction does not apply to donations in the form of annuities. Contributions to foreign institutions of the kinds indicated above may also qualify, if the institutions have been designated as such by the Ministry of Finance.
4.3. Employee savings and profit-sharing schemes
Employers and employees may agree to set up employee savings schemes in which a certain maximum amount of the salary is exempt from tax and social security contributions. Employers in the private sector can set up profit-sharing schemes to provide a tax advantage for both employers and employees.
4.3.1. Employee savings schemes
Since January 1994 new rules apply which exempt employers from paying tax and social security contributions on each employee's salary to a maximum of NLG 2,894. This is applicable to salaries based on:
· premium savings schemes, or
· salary savings schemes (including blocked profit-sharing schemes and share option schemes in the private sector).
In premium savings schemes the employer withholds an agreed amount from the employee's net salary and deposits this in a premium savings account. The employer can then award the employee a savings premium of up to 100% of the amount withheld, to a maximum of NLG 1,158. Under certain conditions no tax and social security contributions need to be paid on this savings premium.
In salary savings schemes the employer withholds an agreed amount not exceeding NLG 1,736 of the employee's gross salary and deposits this in a savings account blocked for at least four years. When the sum is paid out it is not liable to tax or social security contributions.
However, the employer is required to pay 10% salaries tax on the exempted amount.
Employers in the private sector can give their employees a share in the (fiscal or commercial) profits of the business or of one or more businesses associated with the business. If the profit payment is blocked in a salary savings account then the rules for salary savings schemes are applicable (the maximum amount on which tax or social security contributions are not due is NLG 1,736). However, in this case the employer does not need to pay 10% salaries tax on the exempted amount.
If the profit payment is not blocked, but is paid directly in cash or documents of value then the employer pays 10% salaries tax on a maximum amount of NLG 1,736. This amount is not liable for social security contributions. Any salary savings received must be deducted from this amount. If a profit payment minus salary savings exceeds NLG 1,736 then the normal rate of tax and social security contributions must be paid over the difference.
4.4. Foreign employees: the 35% rule
A special allowance is granted to certain foreign employees who are assigned to a post with a domestic employer (i.e. an employer established in the Netherlands, or an employer not established in the Netherlands who is obliged to withhold salaries tax on the salary paid to the employee).
If certain requirements are met, then Dutch employers may grant a special tax-exempt allowance of 35%, which is paid in addition to employees' salaries. The allowance is calculated on the basis of the salary as determined in accordance with the provisions of the Wage Tax Act. To obtain the basis for calculating the 35% allowance the salary is multiplied by a factor of 100/65. Employer reimbursements of school fees for the attendance of children at international primary or secondary schools are also exempt from tax. In addition to the 35% rule, expenses incurred in connection with employment are reimbursed tax free.
Foreign employees have to be recruited by or seconded to a domestic employer in the Netherlands. The employer and his employee must first agree, in writing, that the 35% allowance will be applied. Their joint request for the application of this allowance must then be submitted to the Private Individuals Tax Unit (Non-resident Taxpayers) in Heerlen. Once the application has been approved the 35% allowance is applied from the outset. The 35% allowance is applicable for a maximum period of 120 months. This period is reduced by any period of employment with a domestic employer in the Netherlands, or by any time previously spent by the employee in the Netherlands, unless more than ten years have elapsed since the end of such employment, or time spent in the Netherlands.
On the joint request of the domestic employer and the foreign employee the foreign employee, with a few exceptions, is regarded as a fictitious foreign taxpayer with regard to the levy of salaries tax, income tax, and wealth tax.
5. Налог на богатство(Wealth Tax)
5.1. Taxpayers: residents and non-residents
Under the present Wealth Tax Act resident natural persons (resident taxpayers) and non-resident natural persons owning property in the Netherlands (non-resident taxpayers) are subject to wealth tax if their net wealth exceeds a certain amount. The rules for the determination of the place of residence as laid down for income tax purposes are also applicable to wealth tax.
Resident taxpayers
The wealth tax is levied on the total net wealth, which is defined as the value of the assets less any liabilities. The tax is levied at the beginning of the calendar year. Assets and debts are taken into consideration at their market value. Although both husband and wife are liable for taxation the assets of both are added together. A child's assets are taxed under the child's name.