So you're an international student living in the Netherlands and you've finally found a part-time job. Though the initial wave of euphoria has slowly worn off and you've slowly but steadily settled into your routine, a question remains: what should you do about taxes? Luckily for you, we've partnered with Taxperience to create resources explaining the Dutch tax system to international students. Don't have enough time to read our tax guide? This article will cover how to file taxes as an international student in the Netherlands.
Bruto Salaris vs Netto Salaris
When you receive your paycheck, two amounts should be mentioned on the payslip: bruto salaris and netto salaris. What's the difference between the two? The bruto salaris is your salary before payroll tax, holiday pay, and pension contributions have been deducted from your pay. The netto salaris is what you receive in your bank account each month. If your paycheck or contract only mention the bruto salaris, you can use College Life's income tax calculator to see how much you'll actually earn.
The whole point behind the difference in between the two salaries is that taxes and social security contributions are automatically withdrawn from your pay so that in theory, you don't even have to fill in a tax return. This then begs the question: why do you still have to fill one in?
How does filing an income tax return work?
Though payroll tax is already deducted from your salary, a tax return allows the government to calculate your taxes while taking into account your overall financial situation. As your employers don't know the amount you have in your savings account(s) or if you have invested in real estate, a tax return allows you to present all sources of income you might have in addition to your assets and the deductions you might be eligible for.
What goes into an income tax return?
Income tax is subdivided into three categories which each have their own rate. Each category is called a box. In Box 1, you fill in any income you receive from homeownership, business profits, grants, wages, tax refunds, and deductions. Different levels of income are divided into four tax brackets with a different tax rate applicable to them. The tax rate progressively increases according to the tax bracket. For a more in-depth coverage of how the tax brackets are determined, check out our tax guide!
Boxes 2 and 3 are more simple as a flat taxation rate applies to them. Box 2 concerns the financial interests you have a company and Box 3 concerns your capital (savings and investments).
Why you should file an income tax return
Students count as tax residents in the Netherlands as your primary place of residence is here, as well as your source of income. Now you might be thinking that as students, the probability that you have bought a property in the Netherlands or invested in a successful company here is pretty low. While that may be true, filing in a tax return can actually be to your advantage as things such as textbooks and other study costs are deductible from your taxes. How this works is any costs that contribute to the advancement of your career aka your degree are tax-deductible. By filing a tax return, you can actually refund not only your tuition but also textbooks and readers!
Now that you know the basics about what a tax return is and why you should file one, now comes the terrifying task of filing your taxes. Normally, at the end of the fiscal year, you should receive an invitation from the tax office to file your taxes. If you don't receive one, you can either file tax return digitally or via a tax accountant. If you submit it digitally, you’ll need a DigiD. A DigiD is a digital means of identification liked to your BSN. You can apply for one using your BSN and use it to access many online government platforms.
Need some extra help? Taxperience has a service designed to help internationals through the tax process. Check out College Life Taxes to read more about it!