The Netherlands is an exhilarating destination for Americans living abroad. A small country but with a unique and proud history, the Netherlands today is characterized by modern, tolerant values, a positive outlook, and an abundance of bicycles! As an added bonus, almost everyone speaks great English. With the US dollar currently strong, it’s a good time to move to the Netherlands, so read on to find out what you need to know about filing your US expat tax return as an American expatriate living in the Netherlands.
All US citizens and green card holders living abroad are required to file a US federal tax return every year reporting their worldwide income. So if you're American and you live in the Netherlands, whether you work for a Dutch or international company, or if you’re self-employed, you still have to file a US return declaring your worldwide income. In theory, you're liable to pay US taxes too, however in practice most people don't end up paying US tax as they claim either the Foreign Earned Income Exclusion (which excludes up to around $100,000 of foreign earned income from US tax liability), and/or the Foreign Tax Credit, which allows you to claim a dollar tax credit for every US dollar equivalent of tax paid in another country. While which you claim will depend on your personal circumstances, both need to be actively claimed by filing the relevant form when you file your federal tax return.
Filing Dates for Expats
While any tax you may owe to the IRS still has to be paid by April 15th, expats get an automatic filing extension until June 15th, with a further extension available upon request until October 15th. The reason for this extra time to file is that there's often more to file when you’re an expatriate.
“Income tax in the Netherlands is a bendy concept: with a good accountant, you can rack up deductions and exploit loopholes.”
- The New York Times
American expatriates have to declare any overseas assets worth over $200,000 per person (excluding property and other tangible assets like cars and jewelry) using form 8938. If you have a total of over $10,000 in foreign bank or investment accounts at any time during a tax year meanwhile, you are required to file an FBAR (foreign bank account report) declaring the account details and balances. This includes accounts you have any kind of signature authority or control over, such as a company bank account, or a joint account. If you have been living in the Netherlands for a while but weren't aware of your US filing requirements, don't worry though, as there's an IRS amnesty program that lets you catch up on your filing without paying penalties (which can be steep if the IRS finds you first) called the Streamlined Procedure.
What about Dutch Taxes?
The Dutch tax year is the same as the US tax year, however tax returns are due by April 1st. If your only income is from employment in the Netherlands, tax is deducted at the source, and you don’t have to file a tax return. However, if you do you may be able to claim a refund if you can claim certain deductions.
Need some help?
US Expat tax filing requirements are complex compared to Americans filing from the US, and they also have to be filed potentially as well as a Dutch tax return. We recommend that for your US expatriate taxes you consult an expat tax specialist who will ensure that you employ the right strategies and claim the right exemptions to minimize your US tax liability with respect to your individual situation.