Filling your tax return

Step 2: Filing your 2021 tax return

Tax deductions and tax credits

What do you need to be aware of when completing your tax return? A lot of people forget to check their tax return carefully and overlook certain deductions they could have made and/or tax credits they could have taken advantage of.

Income tax and dividend withholding tax

You may be able to take advantage of tax credits and pay less income tax. More information (in Dutch) is provided on the page Aftrekposten en heffingskortingen on the website of the Tax and Customs Administration .

Other deductions for your tax return

If you have made any donations (for which you have proof) to one or more officially registered charities in 2021, we advise you to make a list of these donations. If they meet certain conditions, donations are tax deductible. Enter them in Box 1 first. If you still have deductible donations after the income declared in Box 1 has been reduced to zero, you can settle these in Box 3 and subsequently in Box 2. You must distinguish between ‘one-off’ donations and ‘periodic’ donations. In the case of the latter, the obligation to make donations is laid down in a contract or a notarial instrument of donation.

If you make donations to one or more public benefit organisations (known as ANBIs in Dutch) that have been designated by the Tax and Customs Administration as a cultural organisation, you can increase the value of your donation by a certain percentage on your tax return. For tax purposes, you can increase the value of periodic and other donations you made privately to cultural public benefit organisations in 2021 by 25%, up to a maximum of €1,250. You will reach this maximum if you give at least €5,000 to cultural public benefit organisations in a calendar year.

The box system (in Dutch)

  • First deduct the medical expenses as a deductible item from your taxable income in Box 1. 
  • If your income in Box 1 is too low, you can deduct the remainder from your income in Box 3 (from savings and investments). 
  • You may only include the medical expenses in the tax return for the year in which you paid these expenses. In 2021, the part of the taxable income that is higher than €68,507 in the highest income tax bracket will be taxed at a rate of 49.5%. In contrast, in 2021 the medical expenses in this highest tax bracket will still be deductible at a tax rate of 43%. This deduction percentage will be further reduced over two years to a base rate of around 37% in 2023.

If you were taking an expensive course or studying for your current job or future profession in 2021 and you incurred study fees and costs for this, certain amounts that you paid in 2021 are deductible as ‘study costs and other educational expenses’ under certain conditions. Enter these first in Box 1 of the tax return, and if you then have any deductible study costs left over you can declare these in Box 3 and Box 2. Deductible study costs include tuition fees, course fees, school fees and exam fees. They do not, however, include travel expenses and the costs of a laptop, tablet or printer, etc. 

Do bear in mind that this deduction is likely to still be available only in 2021 and 2022, as this scheme has been replaced by a grant scheme in 2022.

A different arrangement applies to personal deductions. This concerns, for example, spousal maintenance you’ve paid, specific medical expenses and deductible donations. If you can deduct these costs above a certain threshold, you can first deduct them from your taxable income in Box 1 and, if any remains, from your taxable income in Box 3 and then from your taxable income in Box 2. You can settle the remainder in your tax return for next year.

Home loan

  • Any costs that relate directly to taking out, extending or repaying a loan for your home in Box 1 are deductible from your taxable income in Box 1 for the year in which these costs were incurred. These costs include advice and brokerage fees for your mortgage adviser, notary fees and land registry fees in relation to the mortgage deed, valuation costs to get the mortgage, and the costs involved in applying for the National Mortgage Guarantee.
  • If you incurred charges because you remortgaged or repaid the mortgage for your home early in 2021, you can deduct these charges from your taxable income in Box 1.

If you borrowed money in 2021 from your company, a family member or another person to be able to buy your home, bear in mind that you may be required to provide details of this loan on your tax return. Deduction of the interest and other costs in relation to such loans is conditional on, among other things, you being under an obligation to make repayments on the loan throughout the loan term. This is because the Tax and Customs Administration needs to be able to check that you have made sufficient repayments on this loan.

Box 1 is important to you if you have, for example, temporarily rented accommodation to third parties for a short period of time (‘short let’). This is explained in more detail in the article (in Dutch) ‘Verhuur via Airbnb: wat mag wel en niet?’ (Renting via Airbnb: what’s allowed and what’s not?).

Box 3

On 24 December 2021, the Dutch Supreme Court ruled that the tax relating to gains from savings and investments (Box 3 of the tax return) is not acceptable in its current form. However, it is advisable to declare your Box 3 assets on the tax return in accordance with the current tax rules. If you then receive a tax assessment, you can file an objection to it (keep the objection period of six weeks in mind though). The Tax and Customs Administration has not yet decided how to deal with the ‘Box 3 taxes’ in the 2021 assessment. Below we discuss how to fill in the tax return in accordance with the current tax rules.

The box system (in Dutch)

Box 3 of the tax return is where gains from savings and investments is taxed. In 2021, the general exemption in Box 3 (the tax-free allowance) is €50,000, while the exemption for partners for tax purposes jointly is double that amount, i.e. €100,000. You do not have to pay any income tax on amounts declared in Box 3 that stay below this threshold. 

Despite the fact that the tax-free allowance has been increased to €50,000, taxpayers with Box 3 gains of €31,430 or more must include these in Box 3 on the tax return for 2021. The reason for this is that the Dutch government wants to prevent the increase in the tax-free allowance from affecting the means test in many means-tested (i.e. income related) schemes. If it were to have effect, more people than intended would qualify under a means-tested scheme or receive more/pay less under such a scheme. Special arrangements intended for low-income individuals/families include the healthcare allowance, the child budget, the childcare allowance, the personal contribution for the Long-term Care Act and more. All taxpayers with Box 3 assets pay a fixed rate of return on these assets. Different fixed rates apply depending on which of 3 brackets the total amount of these assets fall under. In 2021, the total assets under this box are taxed at a rate of between 0.59 and 1.76%.

In principle, tax debt is not debt you list in Box 3. An exception is inheritance tax debt and, under certain conditions, tax debts from a provisional income tax assessment. This is explained in more detail (in Dutch) on the ‘Belastingschulden’ (Tax debts) page on the Dutch Tax and Customs Administration’s website.

If you win a prize in a lottery, this could have significant consequences for your income tax return. Any lottery winnings in 2021 must initially be declared on your income tax return in 2022 and not on your 2021 return. This is because the reference date (1 January) has already passed. It’s possible that, as a lottery winner, you are having to deal with Box 3 for the very first time. Or it could be that you have claimed assets in Box 3 before, but your winnings now bump you into a higher tax bracket. More information (in Dutch) is provided on the page ‘Berekening belasting over inkomen uit vermogen over 2021’ (Calculating tax on income from assets for 2021) on the website of the Tax and Customs Administration.

Divorce

If you pay spousal maintenance to your ex-partner, the amount you pay will generally be tax deductible. Your ex-partner must declare the same amount as taxable income on their income tax return. Child maintenance is not tax deductible, nor is it considered a form of debt for the purpose of Box 3 either.

If you have moved out of your home on account of a planned or completed divorce while your ex-partner continues to live there, you will be able to continue to use the mortgage interest deduction for your share of the ownership of the home for a maximum of 24 months after you move out. You must then also declare the imputed rental value for your share of the ownership over that same period. This is balanced out by a spousal maintenance deduction of the same amount. After all, you have granted your ex-partner the benefit of occupying the property.

Death

Given that the death occurred in 2021, this means that at 00:00 on 1 January 2021 you did not have any inheritance tax debt relating to this death yet. You can include this debt in your 2022 income tax return, which you can file with the Dutch Tax and Customs Administration from March 2023 onwards.

If so, you can generally include the amount of this debt in Box 3 of the tax return, regardless of whether you had already received an inheritance tax assessment from the Tax and Customs Administration for this.

If you own a business

You may be self-employed or even run a private limited company (BV), for example, in which case you may be eligible for a deduction for your business. This is subject to strict rules. The Tax and Customs Administration has developed a tool to assess a limited number of possible situations.

If you have borrowed funds from your company, you owe your company money and consequently pay your company interest. This is debt that you must declare in Box 1 or Box 3 of your tax return. If you use the loan to buy, renovate or maintain your home, this loan should in principle be declared in Box 1 as it will then be considered home acquisition debt. The loan also goes in Box 1 if you have used the amount borrowed to buy an asset that you subsequently made available to your company. In all other cases, the debt will generally go in Box 3. If you have lent money to your company, you have a receivable from your company that, in principle, goes in Box 1.

If so, you do not have to declare the interest if the balance has not exceeded a credit amount of €17,500 and has not fallen below a debit amount of €17,500 at any point in the year. You will then not have to declare any current account debt in Box 3 either.

  • Have you received dividend from a Dutch company?
    If you received a dividend payment from a Dutch company, they will have withheld 15% of the gross dividend for tax purposes. If so, you can offset the full amount of the dividend tax withheld against the income tax you have to pay. Enter this amount next to ‘Ingehouden dividendbelasting’ (Withheld dividend tax) in the box ‘Te verrekenen bedragen’ (Tax and contributions already paid). If you do not have to pay any income tax, the Tax and Customs Administration will refund the dividend tax withheld.

    Dutch dividend withholding tax is 15% of the gross amount of the dividend paid. Enter this amount next to ‘Ingehouden dividendbelasting’ (Withheld dividend tax) in the box ‘Te verrekenen bedragen’ (Tax and contributions already paid). You can offset the full amount of the dividend tax withheld against the income tax you have to pay. If you do not have to pay any income tax, the Tax and Customs Administration will refund the dividend tax withheld.
  • Have you received dividend from a non-Dutch company?
    If you received a dividend payment from a non-Dutch company you can request a tax credit. The reduction depends on the agreements that the Netherlands has made in a tax treaty with the country in which the company concerned has its registered head office. The tax return includes a section called ‘vrijstellingen en verminderingen’ (exemptions and reductions) and here you will find ‘aftrek om dubbele belasting te voorkomen’ (deduction to avoid double taxation). There you state the part of the withheld foreign dividend tax to which the other country is entitled under the tax treaty (in many cases 15% of the dividend received) That part is deducted from the income tax to be paid in Box 3. It should be noted that this reduction is capped at the income tax that you must pay on the underlying shares in Box 3. If more tax was withheld than the percentage agreed in the tax treaty, you will need to reclaim the excess from the tax authorities in the country concerned.

The information on our website about submitting your tax return applies to people who are liable for tax in the Netherlands . If you have not received an ‘aangiftebrief’ (notice of obligation to submit a tax return), or do not know whether you need to submit a tax return, check with the Tax and Customs Administration (Belastingdienst).