Income tax and health care insurance premium

If your business has a permanent branch in the Netherlands, you are obliged to pay income tax in the Netherlands. In some cases, this obligation also applies if your business is based outside the Netherlands, but you do have income in the Netherlands. Therefore you always have to contact the Dutch Tax and Customs Administration if you intend to perform activities in the Netherlands.

Rates

If you are liable for income tax in the Netherlands, you must file a tax return. How and when you have to file this return depends on where you are based. The tax is imposed on three types of income. This income is assigned to three categories (‘boxes’), each with its own rate:

1. taxable income from employment and home ownership;
2. taxable income from business ownership (including partial business ownership);
3. taxable income from savings and investments.

The rate for Box 1 is an incremental rate with four brackets. The total amount of tax owed in the three boxes is your income tax.

Health care insurance premium

As an entrepreneur, freelancer or home help you also have to pay an income-dependent contribution to the government for your health care insurance. This contribution is on top of the premium that you pay to your health care insurer. The higher your income, the higher your contribution will be. You may be eligible for an allowance towards the costs, known as the ‘health care allowance’ (zorgtoeslag).

Conditions

If you are an entrepreneur for income tax purposes, you can deduct certain costs. However, there are a variety of conditions which you must fulfil to be considered an entrepreneur for income tax purposes in the Netherlands. After registration, the Tax and Customs Administration decides whether you meet the requirements based on your circumstances. What matters is that you can demonstrate that you work independently and at your own risk.

In deciding whether you are an entrepreneur for income tax purposes, the Tax and Customs Administration will use a number of conditions, including the following:

• Do you make a profit?
• How independent is your business?
• Do you have money at your disposal?
• How much time do you devote to your business?
• Who are your clients?
• How do you advertise your business?
• Do you bear any 'entrepreneurial risk'?
• Are you liable for your business’ debts?