These days, it is common to make a capital gain when selling your home. Did you know that one of the upsides of the Dutch tax system is that there is no capital gains tax? There are some conditions, however. Arnold Waal from Tax is Exciting explains.
Capital gain when selling your home
Selling your home is a fortunate event these days -purchasing a home, however,can be a nightmare. The fortunate part: potential buyers will bid over the asking price. The nightmare part: you will need to overbid the asking price in order to be able to purchase a new home. Both are very much in balance, though.
For example, my contractor told me he sold his house with the same profit he had to overbid the house he purchased. Basically, he now has a bigger house for the same monthly costs.
No capital gains tax?
Indeed, in the Netherlands there is no capital gains tax for private individuals. That is also the reason why nearly no company purchases a home. A company selling such a home is subject to capital gains tax. That said, in this housing market, where the employee cannot afford the purchase of a house, the employer often helps. We now see employers actually purchasing a property in the name of the company to house their employee. The advantage for the employee is that the rent being charged by the employer cannot exceed 18 percent of their annual salary.
What are the conditions?
The Dutch government learned from their mistakes. In the past, there were no conditions, so you had your house financed for 100 percent. Actually, 120 percent, as in those days, you could finance the purchase costs as well. You sold the house, made a profit, purchased a Porsche with the profits and financed the next house for the full amount again.
Now, there are conditions. The rule is that you need to invest the gains made into your next house, which is your main residence. The penalty for not doing sois that you cannot deduct the mortgage interest for the part of the extra mortgage you took out.
Example condition capital gains tax
Here is an example. You purchased your home 10 years ago for 350.000 euros, 100 percentfinanced. You paid back 120.000 euros on this loan, hence today the loan on the house is 230.000 euros.
You then sold the house for 550.000 euros, and you purchased the next house for 650.000 euros. You took out a 650.000 euros loan for the next house. The capital gain is 550.000 euros minus the 230.000 euros remainder loan, totalling 320.000 euros.
That implies that for the next house costing 650.000 euros, you can only take out a tax deductible loan of 650.000 euros minus the 320.000 euros gain, which is 330.000 euros. In your tax return, the 330.000 euros for the house is tax deductible, while the 320.000 euros is not.
Fine tuning
The above example is a rough example. Some non-deductible costs influence the capital gain in a lower amount. Plus, most people want to install a new bathroom and kitchen in their next home -these refurbishments are taken from the capital gains amount if no loan was taken out for these costs.
It is good or bad, this condition?
It depends on who you ask. My experience is that someone will be eager to purchase a Porsche while another will be more relaxed when they have less mortgage debt. I can relate to both; the Porsche, as you do not know how long your life will last (not sure if a fast car will influence this…), and on the other hand, if the economy gets worse, a low debt will be handy.
Accurately calculating the capital gain to be invested in your next home is what the Tax is Exciting team gets excited about. It’s also a service they offer as part of their tax return filing service! Contact Tax is Excitingnow with questions about all things tax, including capital gains.
FAQs
Although capital gains tax does not apply in the Netherlands in the same way as in many other European countries, returns made on various investments can still fall into the scope of the Dutch tax system.
What is tax-free capital in the Netherlands? ›
Tax-free allowance
Fortunately, you do not have to pay tax on all your assets, as there is an exemption. For the year 2023, the tax-free allowance is €57,000 (€114,000 applies to tax partners). The tax-free allowance will remain the same in 2024.
Which country has highest capital gains tax? ›
Denmark levies the highest top capital gains tax of all countries covered, at a rate of 42 percent. Norway levies the second-highest top capital gains tax at 37.8 percent. Finland and France follow at 34 percent each. A number of European countries do not levy capital gains taxes on the sale of long-held shares.
Why is the Netherlands' tax so high? ›
Why are the Netherlands taxes so high? European countries have notoriously high tax rates – but the advantages and benefits residents of these countries receive usually make the extra costs worth it. The Dutch tax rate covers several social programmes, including unemployment, health insurance, sickness benefits, etc.
Is there a wealth tax in the Netherlands? ›
In the Netherlands, wealth tax does not exist as such. The actual investment income received is not taxed. However, as part of the income tax system, the deemed income from the investment portfolio (e.g. bank accounts, shares) is taxed under the box 3 system.
Are capital gains taxable in the Netherlands? ›
Although capital gains tax does not apply in the Netherlands in the same way as in many other European countries, returns made on various investments can still fall into the scope of the Dutch tax system.
Why is Netherlands called tax haven? ›
Effectively, the Netherlands is a conduit country that helps to funnel profits from high-tax countries to tax havens. Particularly the Dutch Special Purpose Entities attract income, often as interest and royalty payments, and pass it on, effectively untaxed, to tax havens.
Where in Europe is the lowest capital gains tax? ›
Moldova applied the lowest capital gains tax at 6%, while Bulgaria and Romania came in at 10% each and Croatia at 12%. Greece and Hungary both followed with 15%. Several countries, such as Belgium, Czech Republic, Georgia, Luxembourg, Malta, Slovenia, Slovakia, Switzerland and Turkey don't impose a capital gains tax.
Which country has no capital gain tax? ›
Not all countries impose a capital gains tax, and most have different rates of taxation for individuals compared to corporations. Countries that do not impose a capital gains tax include Bahrain, Barbados, Belize, the Cayman Islands, the Isle of Man, Jamaica, New Zealand, Sri Lanka, Singapore, and others.
What is the most taxed country in Europe? ›
Denmark is the European country with the highest top statutory income tax rate as of 2024, with the Nordic country having a top taxation band of 55.9 percent.
The 30% tax ruling is a tax advantage for highly skilled migrants in the Netherlands. An employer can pay up to 30% of the salary of an expat employee with the 30% ruling free of tax. An enormous tax saving for both employee and employer. Try our tax calculator to find out how much you can save with the 30% ruling.
Do expats pay taxes in the Netherlands? ›
Expatriates may qualify for a special tax regime, the 30% facility. This facility exempts 30% of certain employment income from taxation. A non-resident individual receiving income from employment actually carried on in the Netherlands is subject to Dutch income tax.
What is the tax advantage of expats in the Netherlands? ›
The 30% ruling is a Dutch tax advantage for highly skilled employees hired abroad to work in the Netherlands. If you can meet the various conditions, your employer can pay up to 30% of your salary as a tax-free allowance for up to 60 months (or five years): 30% of your wage is tax-exempt for the first 20 months.
What is considered rich in the Netherlands? ›
The rich are defined as those with with a minimum of €500,000 of disposable assets. A full 39% of repondents said they had inherited all or part of their wealth. Another 31% derived their money from their own businesses. This number advanced to 37% for those with more than €1m of discretionary assets.
Is inheritance taxed in the Netherlands? ›
According to the Dutch Inheritance Tax (schenk- en erfbelasting), inheritance of property from a person who was a resident (or deemed resident) in the Netherlands at the time of death, will be taxed. Inheritance Tax is payable by the recipient on the deceased's worldwide estate.
Does Netherlands tax foreign income? ›
If you live in the Netherlands, you must state your worldwide income in a Dutch tax return. Your worldwide income is your Dutch and non-Dutch income combined. You declare both incomes in the Netherlands, but this does not mean that you always have to pay income tax on both in the Netherlands.
Is there a tax-free allowance in Netherlands? ›
A fixed amount of your assets (your assets minus your debts) is exempt from tax. This is the tax-free allowance. If you have a tax partner (only available in Dutch), or if you have a tax partner for part of the year and do choose to be tax partners for the whole year, the tax-free allowance is doubled.
Is 30% tax-free in the Netherlands? ›
The 30% reimbursem*nt ruling (also known as the 30% facility) is a tax advantage for highly skilled migrants moving to the Netherlands for a specific employment role. When the necessary conditions are met, the employer can grant a tax-free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax.
What is the minimum capital requirement in Netherlands? ›
You need €45,000 starting capital to register an nv. Find out what else is required if you want to set up a public limited company.
How to shop tax-free in Netherlands? ›
At the store
Request tax-free shopping when making a purchase. Show your passport or inform the retailer of your non-EU residency. Look for stores displaying a tax-free shopping sign or confirm with the store before making your purchase. Complete any necessary refund forms or steps before your departure day.
