It is that time of the year again. If you have submitted a Dutch income tax return last year it is highly likely your invitation by the Tax Authorities to do it again has landed on your doorstep. For those who are first timers: it is not really an invitation. When you receive that letter, it is a legal obligation. But it is not all bad. It is also a possibility to claim tax deductions.
Tax deductions
The Dutch tax system allows 4 categories of tax deductions involving last year’s expenses:
- Financing costs of your main residence
- Pension contributions
- Certain healthcare expenses and other personal deductions
- Gifts to organizations with societal relevance.
There are restrictions for each, all different. This why many seek help to complete the return to avoid (i) mistakes resulting in costly penalties and (ii) spending the time checking deduction eligibility.
Harnessing big tax data
The Tax Authorities have made vast steps collecting likely or certain tax data from sources in the country (income from work, pension or benefits, investment and pension policies, mortgages, savings and investments) and abroad.
We are sometimes amazed at the level of detail some international information has. There are restrictions in jurisdiction (many but not all countries agree to share information of residents or former residents) and digital savviness (can every country share the data another country needs?). So not all is there but a lot is. The first moment you can see how much is available is 1 March. It is the day the Tax Authorities make your preliminary filled tax return (“Voorlopig Ingevulde Aangifte” or VIA) available to you. By doing so, the Tax Authorities aim to reduce your effort to complete the return, increase the rate or returning and shorten the time it takes.
Preliminary tax data not always correct or complete
The VIA is not always correct and often incomplete. It is a good starting point, no more. An incomplete but good illustration of missing inputs concern:
- When you update your mortgage with a new valuation, use mortgage advice, visit the notary to increase your mortgage for financing improvements you expense.
- Your GP instructs you to follow a diet which is on the list accepted by the tax authorities, some of the cost may be tax deductible (link in Dutch https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/relatie_familie_en_gezondheid/gezondheid/aftrek_zorgkosten/overzicht_zorgkosten/dieetkosten/dieetlijsten/dieetlijst-2023).
- You have contributed to a private pension plan (“lijfrente”, if within fiscal boundaries).
- You started receiving or paying partner alimony payments.
- You have committed to a 10-year gifting plan to your local rugby club.
Tax planning makes sense
Everything you can do preparing for the return of last fiscal year is set in stone already. There is nothing you (or anyone, for that matter) can do to change what happened.
But you have possibilities to influence what will happen this year. Planning your financial future (even as close as thisyear) can be a smarter way to use income or wealth. Realizing your life ambitions financially will become much easier when you put expert knowledge at work.
For now, we wish you much success and smooth sailing completing your tax return.