Income tax return

Each year around March it is time to file our taxes. The official term for this is filing your Dutch personal income tax return and social security contributions. It simply means that we should report our (worldwide) income, we should claim the possible personal deductions we are eligible for and we should report the value of our savings and investments in the case that these exceed the tax free threshold.

By filing your Dutch personal income tax return you can deduct certain expenses from your total income. These are called your personal tax deductions, because each taxpayer has his/her own tax filing requirement in the Netherlands. The deduction can include the mortgage interest of your main residence , educational costs, medical expenses which are not reimbursed by the health insurance and exceeding the deductible part and/or alimony obligations to your ex-partner. By deducting these expenses from your total amount of income you will lower your taxable base and by doing so the amount of taxes you need to pay decreases.

In your payroll, with the monthly calculation of the wage withholding taxes / income taxes, your employer unfortunately cannot take your personal expenses into account. As a result, the taxes considered in your payroll and paid by your employer to the Dutch tax authorities on your behalf (also the difference between your gross and net income) are always more than in the situation when you have personal deductions. Therefore, when you have personal deductions, the outcome of your tax return will result in a tax refund. This refund will be the difference between the income tax that is calculated and paid by your employer and the income tax that you calculated at the moment of filing your Dutch personal income tax return.

These days the Dutch tax authorities prefills your tax return data when you start with the preparation of your tax return (VIA). Since the data is already filled in by the Dutch tax authorities, the question that arises frequently is:

If your answer to al off the above is ‘no’ than you can try to complete the pre-filled income tax return as it is available on the website of the Dutch tax authorities. All you need to do is gather the information needed, check the pre-filled income tax return and correct it if needed. But like you can read in the previous list there are a lot of situations that can change the end result of your income tax return. Practice experience shows that people still make mistakes and miss a lot of tax benefits.

If you have a tax partner you should research how the tax deductions and savings and investments should be divided in a most beneficial way. Even though every taxpayer has his/her own tax filing obligation, as tax partners you can ‘allocate’ personal deductions and the value of your savings and investments between each other to take a more beneficial position each.

If you have a child or multiple children you might be eligible for the income dependent combined tax credit. If you have a non-working partner, you might be eligible for the pay out of the general tax credit.

Because of all these possible variations, most people rather outsource their personal income tax return to a specialized tax advisor or bookkeeper. But keep in mind that there are large differences there as well. Some tax advisors simply fill out the income tax return using the information you supply them without taking your past and future situation into account. Some even use your Digi-D details and simply complete the prefilled tax return as it is made available by the Dutch tax authorities.

When we prepare your income tax return we will never ask for your personal DIGI-D credentials. What we will do is check whether you missed benefits (money) in the years before and whether you are eligible for benefits in the near future.