Moving to the Netherlands to start a business is exciting, but the tax system can be a bit overwhelming at first. This guide will break down the basics of Dutch taxation for new foreign entrepreneurs, focusing on the three main categories: Boxes 1, 2, and 3. We’ll also provide concrete tips to help you save on your tax bill.
If you would like to learn more about doing business in the Netherlands, you can read our full country guide.
Understanding Box 1: Income from Work and Homeownership
Box 1 is where you’ll deal with income from your employment or business. As an entrepreneur, your business income falls into this category as long as you work a minimum of 1,225 hours per year. One of the advantages of Box 1 is the ability to deduct eligible business expenses, such as office supplies, marketing costs, and travel expenses related to your business. Don’t forget to deduct charitable donations and specific medical expenses, as these are often overlooked.
Keep in mind that Box 1 taxes are progressive, meaning the rate increases as your income rises. There are currently two tax brackets in Box 1.
| Personal Income Tax (IB) | 2023 | 2024 |
|---|---|---|
| Bracket 1 | 36,93% up to €73.031 | 36,97% up to €75.518 |
| Bracket 2 | 49,50% from €73.031 | 49,50% from €75.518 |
Tip: To save on Box 1 taxes, make sure you are claiming all eligible business expenses. Keep track of all your expenses throughout the year so you don’t miss any deductions.
Box 2: Substantial Investments in Companies
If you own more than 5% of a company, your income from this investment will fall into Box 2. Similar to Box 1, there are two tax brackets here, with the first one being taxed at a lower rate. Dividends you receive from the company will also be taxed in this box. The company pays part of the tax, and you pay the rest.
Tip: Consider transferring ownership of your business to your children to minimize your tax burden. This involves a share transfer but can be a complex process, so it’s important to seek professional advice before taking any action.
Box 3: Savings and Investments
Box 3 covers income from savings and investments. This area is currently undergoing changes due to a recent court ruling that declared the existing system unfair. As a result, it’s important to file objections to any Box 3 assessments you receive from the tax authorities until the new system is implemented.
In the meantime, you can minimize your Box 3 tax burden by holding your wealth within a company (BV) rather than taking it out as dividends. Investing in green initiatives or specific blocked accounts, like pension accounts, can also be beneficial.
Tip: Try to keep your wealth under the Box 3 threshold to avoid paying unnecessary taxes. This can be done by investing in a BV or by taking advantage of green investment schemes.
Overall Tips for New Entrepreneurs
- File Objections: Always file objections to any Box 3 assessments you receive.
- Keep Wealth in a BV: Consider keeping your wealth within a company structure to reduce your Box 3 tax burden.
- Explore Green Investments and Blocked Accounts: Look into investing in green projects or blocked accounts for tax advantages.
- Seek Professional Advice: Don’t hesitate to consult a Dutch tax advisor if you have any questions or need personalized guidance.
Understanding these basics about Boxes 1, 2, and 3 can empower you to make informed financial decisions for your business. With a bit of planning and the right advice, you can minimize your tax burden and maximize your profits. Remember, professional advice can go a long way in optimizing your tax situation and ensuring your entrepreneurial journey in the Netherlands is a success.
