The fiscal consequences of owning a Dutch house while not living in the Netherlands.
If you live outside the Netherlands and you own property in the Netherlands, certain taxes come into consideration. I will discuss these below. This explanation assumes the purchase of a (holiday) home. It is also assumed that the house will be used as private property.
The right to levy taxes
Although you live outside the Netherlands, the Netherlands is authorised to levy taxes.
The country in which the property is located has the right to levy property tax. This is determined by tax treaties.
You are taxed on your global income in your country of residence. This means that, according to the laws there, your country of residence will also want to levy taxes on income from your Dutch property. However, you can apply for a tax reduction in your country of residence to avoid double taxation.
Dutch income tax
In general, the private ownership of a holiday home is taxed in box III in the Netherlands. This means that for tax purposes, you must take a fictitious return on the Dutch property into account. This fictitious return is taxed, any actual income is not and costs are not deductible. Any capital gains on the sale of the property are not taxed, and any losses are not deductible.
Until 1 January 2017, the fictitious return was 4%. The tax on this was 30%, allowing the tax to come to a total of 1.2% (30% x 4%) This amount was calculated according to the value of the property as determined by the municipality. A debt incurred for the purchase, maintenance or improvement of the Dutch property shall be deducted from the value to be taken into account in box III.
An amount of €30,360 (2019) is considered exempt equity and is deducted from the value to be taxed. If you have bought the property together with your partner, each of you must declare half the value and each of you is entitled to the exempt equity.
For example, the value of a Dutch house is determined by the municipality at €250,000. The owner of this house then owes 1.2% income tax on €250,000 – € 30.360, totaling €2,635.
From 2017 on, the fixed fictitious interest rate of 4% no longer applies in box III. The higher the value, the higher the tax. In 2019, the following fictitious return rates are applicable in box III.
Capital from €30,360 to €102,010: 1.94%.
Capital from €102,010 – €1,020,096: 4.45%.
Capital over €1,020,096: 5.6%.
The above example of a valuation of €250,000 means that: 1.94% of (€102,010 – €30,360) + 4.45% * (€250,000 – €102,010) = €1,390 + €5,234 = €7,975. Tax is levied on 30% of this amount, amounting to a total of €2,392.
Dutch transfer tax
When you become the owner of a property in the Netherlands, you are required to pay 2% property transfer tax.
Dutch value-added tax
If you purchase what is considered new property in the Netherlands (completed no more than 2 years ago), you pay 21% value-added tax on top of the purchase price. If you are going to rent out the house permanently as a holiday home, the 21% VAT can be reclaimed. You must add 9% VAT to the rental price.
If the house is located on a holiday park, the value-added tax can be paid by the holiday park under certain conditions.
Municipality tax
Property owners in the Netherlands pay municipal tax. Property tax (including water tax) is determined per municipality and is levied on the so-called WOZ value, the value the municipality places on the land on which the property is located.
Gifting the property
If you emigrated from the Netherlands more than 10 years ago or never lived in the Netherlands and you gift your Dutch property, neither you or the beneficiary are subject to gift tax in the Netherlands. The 2% transfer tax remains obligatory.
Because you live outside the Netherlands, you may have to pay gift tax in your country of residence.
Death and Dutch property
If you die and you emigrated from the Netherlands more than 10 years ago or you have never lived in the Netherlands, the property is exempt from Dutch inheritance tax. Because you live outside the Netherlands, you may have to pay inheritance tax in your country of residence.
In conclusion
In the above I have discussed a number of tax aspects that come into play if you own property in the Netherlands. The description is merely informative, not exhaustive.
If you own property in the Netherlands or are considering buying property here, please consider acquiring professional advice.
For more information or if you have questions please contact:
R.W.M. te Kaat
+31 314 369111
+31 6 11274485
r.t.kaat@stolwijkkelderman.nl