Tax in the Netherlands part 2

Tax in the Netherlands part 2

As mentioned in the article Tax in the Netherlands published on our website on January 20th we will further outline the following subjects for you in this article:
Filing of your Dutch tax return
Self-employment
Buying a house in the Netherlands
Filing Dutch tax return

Deadline
The Dutch income tax return must be filed before April 1st of the year following the tax year. If the deadline of April 1st cannot be met an extension to file can be requested. Koppel tax consultants have a deferral scheme with the tax authorities. We, as a tax consultant, can request an extension to file the income tax return for our clients for a period of up to one year.

Invitation to file (Aangifte brief)
If you do not receive an invitation to file a return before 1 July following the relevant tax year, you must request an invitation to file a return from the tax authorities within a fortnight. If you are of the opinion that no taxes are due, you do not need to request this.

Tax refund
The period in which you can request a tax refund is 5 years from the end of the tax year concerned.
Once the return is filed the tax authorities must issue an assessment within three years of the end of the tax year concerned. If an extension to file was granted the period of three years will be extended accordingly to include the extension time. In practice the tax authorities generally issue a preliminary assessment within 6 weeks of filing the return.

Preliminary & final assessment
The preliminary assessment always agrees with the return filed. The tax authorities will not have reviewed the return. As a result no entitlement derives from it. When the tax authorities have reviewed your return they will issue a final income tax assessment. If an amount is to be refunded and a preliminary assessment was issued no additional tax will be refunded as this is done with the preliminary assessment.

Self-employment
Self-employed persons are entitled to certain tax deductions, such as the self-employed allowance and small business exemption. The filing date for self-employed persons is the same as employed persons: April 1st .
As an employed person you actually pay a part of the income tax due each month via the payroll administration. Since self-employed persons do not have a payroll administration the income tax due will be settled via preliminary and/or final assessments. On order to prevent a high final assessment, you can request a preliminary assessment during the tax year. The benefit of this is that you can pay in monthly installments. During the tax year changes can be made.

In order to be eligible for the self-employed deductions you need to have spent at least 1225 hours on the self-employed business activities and the deductions have a maximum of Eur 7.280 (2012). The small business deduction is 12% of the taxable profit after the self-employment deduction.

Buying a house
The interest you pay on the mortgage for the house which is your main residence is partially deductible. This deduction lowers the taxable income. If you have tax withheld in your payroll administration you will receive a tax refund with the income tax assessment.
As self-employed persons do not have payroll tax withheld during the year the mortgage interest deduction will not result in a tax refund. It will only reduce the amount of tax to be paid.

Purchase year
Some costs relating to the purchase of the house are deductible, i.e. the cost of the notary for the mortgage. Because these costs are only deductible in the year of purchase, and the mortgage interest you pay in the year of purchase is usually only for a partial year, the preliminary tax refund must be amended the following year.

In the next article about Tax in the Netherlands we will discuss tips and tricks for the 2011 income tax return, penalties for late filling, and transfer from employed to self-employed.