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Which type of Dutch personal income tax return do I need?

Which type of tax return do I need?

The Netherlands has various types of tax returns and it depends on your personal situation which one you need. This text explains which of the four possible tax returns you need.

The tax year in the Netherlands is equal to a calendar year. Tax returns must be submitted prior to 1 May following the tax year. An extension is possible and especially in international tax situations, recommendable. The extension can be requested via a tax advisor.

M-return: Dutch personal income tax return for migrants

General:

The M-return stands for migration-return and is the first Dutch personal income tax return a person migrating to the Netherlands will need to submit. This may be for an expat but also Dutch nationals returning to the Netherlands after having lived abroad. It is also the last return to be submitted in case a person leaves the Netherlands to live abroad.

Complex tax return

It is generally a complicated return and as such professional help is recommended. This will result in certain expenses, but if filed correctly it often results in a substantial tax refund which often at least covers the advisory expenses.

It is important that the migration date matches with the the date of departure from or arrival in the other country. If these dates do not match up, it may result in double tax charges. In this respect, where you are assumed to live and when exactly that changes requires attention since countries by definition have different views on this. Contact us to learn more to learn more about tax residency.

One example regarding tax residency: for Dutch tax purposes, residency is based on facts. As such, (de-) registration with a municipality is only an indication that you (no longer) live in the Netherlands but it certainly is not decisive!

Examples:

This migration return requires you to provide information relating to the migration and to define your fiscal starting point. For example:

  • When did you migrate to the Netherlands, or emigrated from the Netherlands,
  • To which country will you move or from which country did you come?
  • A discount for social securities may be claimed because you arrived in the course of the year or when you left the country during the year.
  • You can indicate what the value is of certain possessions when entering the Netherlands in order to claim a so-called step up. This is important to minimize later capital gains tax, if any, for example when you own more than 5% shares in an incorporated entity.
  • the value of your pensions and similar annuities (and certain other possessions with un-taxed profits) will need to be reported when you leave the country.
  • you will have to report whether you own or have setup a trust or whether you are a beneficiary of a trust
  • (And….other)

P-return: Dutch personal income tax return for persons resident in the Netherlands.

General:

This return is for all Dutch tax residents ans basically the common/standard tax return for persons that have lived in the Netherlands the entire tax year. As such, most important question is: were you a Dutch tax resident the entire year or not? This may for example become an important topic if your employer, among others, is not based in the Netherlands.

Important aspects of this return:

In this return, you will always need to report your world wide income. Always. This is the income wherever in the world earned, regardless whether it has already been taxed in that other country or not. After reporting the foreign income, an avoidance of double taxation may be claimed on the basis of a tax treaty (if available) or on the basis of general avoidance rules. We can of course help you determining if you are entitled to such avoidance. 

Applying avoidance incorrectly may have serious consequences: 

  • this may of course result in penalties. 
  • Also, in case of non-Dutch income, tax returns of the past 12 years may be corrected. This may lead to high advisory expenses and high interest charges (currently 8%)
  • Last, a correction in NLD often means that taxes have been paid in the other country by error. The question is always whether this can still be reclaimed or not.

C-return: Dutch personal income tax return for non-residents

General:

This return is intended for persons who are not Dutch tax residents, but who have income from Dutch “sources” (see some examples below) of which the Dutch tax authorities are of the opinion that these are subject to Dutch personal income tax.

Whether or not income from Dutch subjected to Dutch personal income tax depends on Dutch tax law (there is a limited list) but also whether or not a tax treaty applies which allows the Netherlands to tax a certain type of income.

Examples of Dutch source income:

A common example is real estate located in the Netherlands.

Another example may be the salary income for work performed in the Netherlands by an employee who is not a tax resident of the Netherlands. Also here, the question comes up as to when exactly someone is considered to be Dutch tax resident. Let me know if you are interested in more information about this topic.

Last example: owning a business in the Netherlands or a substantial shareholding in an incorporated business (generally a BV) that is based in the Netherlands leads to the obligation to file this tax return.

F-return: last personal income tax return when someone has died

Similar to the above P-return, but only intended for deceased persons. Income needs to be reported from 1 January to the day the person is deceased.