There are an estimated 35,000 Americans living in the Netherlands.
Living in the Netherlands is a great experience for plenty of reasons – the friendly people, the relaxed, stylish culture, the bikes and canals, and the food to name just a few. Plus everyone speaks English. What's not to like? As an American expatriate living in the Netherlands though, what exactly do you need to know regarding filing US expat (and Dutch) taxes?
While Dutch income taxes are relatively high, the good news is if you are paying income tax in the Netherlands, there are various exclusions and exemptions available to prevent you having to pay tax on the same income to the IRS too.
US taxes – what you need to know
If you earn above US$10,000 (or $400 if you're self-employed), you are required to file form 1040. While taxes owed are still due by April 15th, expats get an automatic filing extension until June 15th. This can be extended still further online until October 15th.
“The Netherlands taxes its residents on their worldwide income; non-residents are subject to tax only on income derived from specific sources in the Netherlands.”
If you have foreign assets worth more than US$200,000 (per person), excluding your home if it is owned in your own name, you must also file form 8938 declaring them.
If you had over US$10,000 in total in one or more foreign financial accounts at any time during the tax year, you must also file FinCEN form 114, otherwise known as an FBAR (Foreign Bank Account Report).
The US and Dutch governments share taxpayer info, while Dutch banks pass on US account holders' account info to the IRS, so ensure that you file and filly declare your finances. Frustrating as it may be, the penalties for not filing or incomplete disclosure for expats are stringent to say the least
If you're a US citizen, green card holder, or dual citizen and you have lived in the Netherlands for a while but you didn't know that you were required to file a US tax return, there's no need to panic: there's a program called the IRS Streamlined Procedure which allows you to catch up on your filing without facing any penalties. It's better not to put this off though, as the IRS is actively pursuing expats.
The Dutch tax authority is called Belastingdienst. Even if you can pronounce it, if you are a Dutch resident you still have to pay taxes I'm afraid. Dutch income tax rates are high, starting at 36.55% (including compulsory social security contributions) and rising, and there's no personal allowance. If you are employed in the Netherlands and this is your only income, tax will be deducted before you're paid, and you don't need to file a return.
Tax returns must be filed online by 1st April, though you can request an extension.
As Dutch income tax rates are higher than in the US, for many people it will make sense to claim the Foreign Tax Credit. You can find more information on Dutch income tax rates here.
We strongly recommend that if you have any doubts or questions about your tax filing situation as a US expat living in the Netherlands, you contact an expat tax specialist.
At Bright!Tax, we have clients in over 150 countries worldwide. US expat tax is all we do and we are very good at it. If you have any questions regarding your personal situation, don't hesitate to get in touch and we'll be happy to help.