Dutch Income Tax System: Progressive Rates
The Dutch income tax system for individuals is based on three 'boxes', as explained in our other guide. The most relevant for employed expats is Box 1, which taxes income from work and home ownership. The rates in Box 1 are progressive, meaning income is taxed in layers or "brackets."
These rates typically include both income tax and social security contributions (AOW, Anw, Wlz). Different rates apply to individuals below and above the AOW (state pension) age. For simplicity, this guide focuses on individuals below AOW age.
Quick Tip!
Tax brackets and rates are subject to annual changes. Always consult the official Belastingdienst (Dutch Tax Authorities) website for the most current figures.
Box 1: Income from Work and Home Ownership (Indicative Rates)
For 2025, the indicative tax brackets and rates for Box 1 for individuals under the AOW age are typically structured as follows:
| Taxable Income (€) | Tax Rate (Approximate %) | Notes |
|---|---|---|
| €0 to €38,000 | ~37% | Includes income tax and social security contributions (AOW, etc.). |
| €38,000 to €75,000 | ~42% | The part of your income in this bracket is taxed at this higher rate. |
| €75,000 and above | ~49.5% | Highest tax bracket for income exceeding the second threshold. |
Please note: These rates are indicative and simplified for illustration. Actual rates and thresholds may differ slightly and are adjusted yearly. The lower bracket includes the highest portion of social security contributions.
Tax Credits (`Heffingskortingen`)
To ensure everyone can afford basic living costs, the Dutch tax system includes various tax credits, which are deductions from your calculated tax rather than your income. This effectively reduces the amount of tax you owe.
- General Tax Credit (`Algemene Heffingskorting`): A basic tax credit available to all taxpayers. The amount depends on your income.
- Labour Tax Credit (`Arbeidskorting`): A credit for income from employment. The amount depends on your earned income and age.
- Other Credits: There are other specific credits (e.g., income-dependent combination tax credit) that might apply based on your family situation or other circumstances.
Your employer typically applies the most relevant tax credits directly to your salary payments, so your net pay already reflects these reductions.
Impact of the 30% Ruling for Expats
The 30% ruling is a significant tax advantage for highly skilled migrants recruited from abroad to work in the Netherlands.
How it Works for Income
With the 30% ruling, 30% of your gross salary (including bonuses, holiday pay) is considered a tax-free allowance to cover extraterritorial expenses. This means only 70% of your income is subject to Dutch income tax in Box 1.
- Benefit: Lower taxable income, thus lower income tax liability.
- Impact on Brackets: Your 70% taxable income falls into the regular tax brackets, but the effective tax rate on your gross salary is significantly reduced.
Impact on Box 3 (Savings & Investments)
Beneficiaries of the 30% ruling can also opt for "partial non-resident" status. This exempts your worldwide assets (except for Dutch real estate not used as your main home) from Dutch Box 3 tax.
- Benefit: No tax on savings, investments, or international properties in Box 3.
- Note: You can choose to be treated as a resident for specific purposes, such as mortgage interest deduction for your owner-occupied home.
The 30% ruling makes the Netherlands a financially attractive destination for many international professionals.
Ready to Take the Next Step?
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