US Expats Taxation Netherlands

The taxation of US expats in the Netherlands

US expats and Greencard holders resident in The Netherlands are taxable in The Netherlands on their worldwide income due to their residency and in the US due to their US nationality. The US taxes its citizens on worldwide income irrespective of their state of residency. This could potentially lead to issues of double taxation.

Application of the US – Netherlands tax treaty avoids potential double taxation issues by designating the state allowed to tax. Depending on the type of income i.e. income from employment, dividends, business income etc, the tax treaty will designate which state (winner state) is allowed to tax. The other (loser state) will include the income in its taxable base but will have to provide relief of double taxation by providing a credit or an exemption. A special situation applies with US nationals who have been granted the 30%-ruling.

US expat in the Netherlands

30% ruling and US nationals

Individuals recruited from above who possess specific expertise which is scarce on the Dutch labour market and earn at least € 37.296 (2018) are entitled to the 30% ruling. A lower salary of € 28 350 (2018) applies to individuals with a Masters degree and are below 30 years of age.

The benefit of the 30%-ruling is that the Dutch taxable salary is reduced to a 70% taxable salary, therefore 30% of the salary will not be taxed.

An additional advantage of the 30% ruling is the option to elect the deemed non- resident taxpayer status. Individuals electing this status are not taxed on their worldwide savings and investments in The Netherlands. They are taxed as non-residents for savings and investment purposes. Non-residents are only taxed on the ownership of Dutch property in The Netherlands which is not used as primary property such as a second home.

US expats who have been granted the 30% ruling and elect the deemed non-resident taxpayer status are not treated as residents for Dutch tax purposes. This is due to the application of the Netherlands – US tax treaty. US residents earning income from employment are therefore only taxed on their working days in The Netherlands, unlike non-US nationals who are treated as regular residents for their income from employment and are taxed on all days worked in The Netherlands.

US Nationals with a (US) entity (company)

US nationals resident in The Netherlands owning a company in the US such as a corporation or LLC are taxable on the income from shareholdings in the Netherlands provided they own at least 5% of the share capital. Taxable income from US shares includes dividends and profits from capital gains. Application of the Netherlands – US tax may avoid double taxation of dividends and taxable capital gains.

30%-ruling and owning a US company

US expats who have been granted the 30%-ruling and own at least 5% of the share capital of a US company and elect the deemed non-taxpayer status is not taxable on income from US shareholdings provided the company remains a US resident of the US for tax treaty purposes.

US Greencard holders

Please note that all of the above is applicable to US green card holders as well residing in The Netherlands and who have been granted the 30% ruling.