Income tax:
Individual income tax (inkomstenbelasting) is usually withheld from wages and salary payments. All employers in the Netherlands must deduct a wage tax (wage withholding tax - loonsbelasting) from wages, salaries and other remuneration paid to employees. Income tax is paid on the following: wages; salary; bonuses; other income earned in the Netherlands (e.g. profit, rent, interest, dividends, annuities and pensions); use of car, medical/life assurance paid by employer etc. Tax rates range from 36.35% to a maximum of 60%. Income is subject to tax at graduated rates. These are (for the 1998 tax year):
• 36.35% on the first FL 47.184 (7.1% tax and 29.25% social security contributions)
• 50% tax on income betweem FL 47.184 and FL 56.590
• 60% on taxable income exceeding FL 56.590
A specific tax-free allowance (belastingvrije voet) is available to all taxpayers and is deducted in the computation of taxable income (the general tax-free allowance is FL 8617. For a married person whose spouse has no income the allowance is FL 16.824.
Double taxation occurs when income arising in one country is received by someone resident in another country and is therefore liable to taxes in both. To avoid or alleviate this, the Netherlands has taxation agreements with all the EU Member States, under which each one agrees to give up, or reduce, its tax in certain circumstances.