Tax Efficiency in the Netherlands: A Guide for Expats

February 2026

By Will Glyn

The Netherlands has long been an attractive destination for internationally mobile professionals. A stable economy, strong infrastructure, and a well-educated workforce make it a natural hub for businesses and individuals alike. But for expats, understanding the Dutch tax system is essential — both to stay compliant and to ensure you're not paying more than necessary.

This article is intended as an educational overview. We are not tax advisers, and the information below should not be treated as advice. Tax rules change frequently, and individual circumstances vary. Always speak to a qualified Dutch tax professional before making decisions that could affect your tax position. If you don't already have a relationship with a Dutch tax professional, we'd be happy to put you in touch with one.

Dutch tax residency: how it works

Unlike some countries, the Netherlands does not have a single, bright-line test for tax residency. There's no magic number of days that automatically makes you resident or non-resident. Instead, the Dutch tax authorities look at all relevant facts and circumstances to determine where your life is centred.

Factors that influence residency include:

Physical presence. While not the only criterion, spending more than 183 days in the Netherlands within a 12-month period is a strong indicator of residency. But it's not definitive — you can be resident with fewer days if other ties are strong, or non-resident despite spending significant time in the country.

Permanent home. Owning or renting a home in the Netherlands suggests an intention to reside there. If your family lives with you, this strengthens the case further.

Centre of vital interests. Where are your social, economic, and family ties? Where do you work, bank, socialise, and spend most of your time? The answers to these questions often carry more weight than simple day-counting.

Municipal registration. Registering with a Dutch gemeente (municipality) and obtaining a BSN (citizen service number) is a strong indicator of residency, though absence of registration doesn't automatically make you non-resident.

If you're resident in the Netherlands, you're generally taxed on your worldwide income. If you're non-resident, you're only taxed on Dutch-source income — such as employment income earned in the Netherlands, business profits from a Dutch enterprise, or income from Dutch property.

For those who might be considered resident in two countries simultaneously, tax treaties typically include tie-breaker rules to determine which country has primary taxing rights. These rules consider factors like permanent home, centre of vital interests, habitual abode, and nationality.

The three-box system

Dutch income tax is divided into three "boxes," each covering different types of income:

Box 1 covers income from employment, business profits, and your primary residence. This is taxed at progressive rates — currently 35.75% on income up to €38,883 and 49.5% on income above €78,426 (2026 figures).

Box 2 covers income from a substantial interest — meaning you own 5% or more of a company. Dividends and capital gains from such holdings are taxed at 24.5% on the first €67,000 and 33% above that.

Box 3 covers income from savings and investments. This is where things get complicated — and where significant changes are on the horizon.

Box 3: the current system and what's changing

The Dutch Box 3 system has been controversial for years. Rather than taxing actual investment returns, it taxes a deemed return based on the composition of your assets. The assumption is that different asset classes generate different returns, and you're taxed on what the government thinks you should have earned — not what you actually did.

For 2026, the deemed return on "other assets" (investments, second properties, etc.) is set at 6%, while savings and debts have lower deemed returns. The tax rate is a flat 36%, applied to the total deemed return above a tax-free allowance of €59,357 per person.

The problem? If your actual return is lower than the deemed return, you could end up paying tax on income you never received. The Dutch Supreme Court ruled in 2021 that this system was unfair in certain cases, and the government has been working on reforms ever since.

What's coming in 2028: The government plans to introduce a new system based on actual returns. Under the proposed "Actual Return on Investment Act," you would be taxed on real income — interest, dividends, rent — as well as changes in asset values, whether or not you've sold. For less liquid assets like property and shares in family businesses, a capital gains approach would apply, with tax due only on sale.

The legislation is still making its way through parliament, and details may change. But the direction of travel is clear: the Netherlands is moving toward taxing real returns rather than fictional ones. For expats with significant savings or investments, this could have meaningful implications — positive or negative depending on your circumstances.

The 30% ruling: still valuable, but changing

The 30% ruling (now officially called the "expat scheme") has long been one of the Netherlands' most attractive features for international hires. It allows employers to pay up to 30% of an employee's salary tax-free, intended to compensate for the extra costs of living abroad.

Current rules (2026): The full 30% tax-free allowance remains available, subject to meeting eligibility criteria — including minimum salary thresholds (€48,013 for most employees, or €36,497 for those under 30 with a master's degree), recruitment from abroad, and specific expertise requirements. The maximum salary to which the ruling applies is capped at €262,000.

What's changing in 2027: From 1 January 2027, the maximum tax-free percentage drops from 30% to 27%. Salary thresholds are also expected to increase by around 9-10%. Employees already benefiting from the ruling before 2024 may be protected by transitional provisions.

Partial non-resident status ending: Previously, expats with the 30% ruling could opt for "partial non-resident" status, which largely exempted them from Box 2 and Box 3 taxes on foreign assets. This option was abolished from 1 January 2025, with transitional rules allowing some expats to continue using it through 2026. From 2027, all qualifying expats will be taxed on their worldwide income in Boxes 2 and 3.

For expats currently benefiting from these arrangements, it's worth reviewing your position with a tax adviser to understand how the changes will affect you.

Setting up a BV: pros and cons

A BV (besloten vennootschap) is the Dutch equivalent of a private limited company. For some expats — particularly those running their own businesses or working as contractors — setting up a BV can offer tax and liability advantages. But it's not right for everyone.

Potential advantages:

Limited liability. Unlike a sole proprietorship (eenmanszaak), a BV is a separate legal entity. Your personal assets are generally protected if the business runs into trouble, though directors can still be held personally liable in certain circumstances.

Lower tax rates on profits. Corporate income tax (CIT) is 19% on the first €200,000 of profit and 25.8% above that. If you're earning significant income, this can be more favourable than the personal income tax rates in Box 1, which reach 49.5%.

Flexibility in profit distribution. As a director-major shareholder (DGA), you can decide when to pay yourself dividends, giving some control over the timing of your tax liability. Dividends are taxed in Box 2 at 24.5% (on the first €67,000) or 33% (above that).

Holding structures. You can set up multiple BVs — for example, a holding company that owns an operating company. This can offer additional asset protection and tax planning flexibility, including the participation exemption, which can exempt certain dividends and capital gains from tax.

Potential disadvantages:

Minimum salary requirements. As a DGA, you must pay yourself a "customary salary" — currently at least €58,000 per year (2026). If your business doesn't generate enough to cover this, you may need to apply for an exception, which isn't always granted.

Administrative burden. A BV requires annual accounts, corporate filings, and generally more paperwork than a sole proprietorship. You'll likely need an accountant, adding to your costs.

Setup costs. Establishing a BV requires a notarial deed, which involves upfront costs. There's also ongoing compliance to maintain.

Not always more tax-efficient. If your income is modest, the combination of corporate tax, salary, and dividend taxes may not beat the personal income tax rates available to sole proprietors — especially when you factor in deductions like the self-employed person's deduction and the SME profit exemption.

The decision to set up a BV depends on your specific circumstances: your expected income, your risk profile, your plans for the business, and your personal tax situation. A Dutch tax adviser can help you model the numbers.

Practical tips for expats

Keep good records. If your residency status is ever questioned, you'll need to demonstrate where you spent your time and where your life is centred. Keep a diary of travel, retain rental agreements, and document your ties to both the Netherlands and any other countries.

Understand your treaty position. If you have connections to another country, check whether a tax treaty exists and how it allocates taxing rights. This is particularly important for income like dividends, pensions, and capital gains.

Don't assume the 30% ruling solves everything. While valuable, the ruling has limitations and is changing. Make sure you understand what it covers, what it doesn't, and how long you can benefit from it.

Review your position regularly. Dutch tax rules have changed significantly in recent years, and more changes are coming. What worked last year may not be optimal this year. An annual review with a tax adviser can help you stay on top of developments.

Plan for Box 3 changes. If you have significant savings or investments, the move to taxing actual returns from 2028 could affect you. Consider how your portfolio is structured and whether any adjustments might be beneficial — but take advice before making changes.

The bottom line

The Netherlands offers genuine opportunities for tax-efficient living and working, but the system is complex and evolving. The 30% ruling remains attractive despite upcoming reductions. Box 3 is undergoing a fundamental overhaul. And structures like BVs can offer advantages — but only if they're right for your situation.

We've covered a lot of ground here, but this article is no substitute for professional advice. Everyone's circumstances are different, and the Dutch tax system has nuances that can catch the unwary. Before making any significant decisions, speak to a qualified Dutch tax adviser who can assess your specific situation. If you don't already have a relationship with a Dutch tax professional, we'd be happy to put you in touch with one.

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Proctor Wealth Associates is not a tax adviser. Tax rules are subject to change, and individual circumstances vary. Always consult a qualified Dutch tax professional before making decisions that could affect your tax position.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.