The Dutch Tax System
for Visual Learners
The Netherlands taxes your income through three separate "boxes." Each box covers a different type of income and has its own rates. Here's how it all works.
How It Flows
Your income enters one of three boxes
Every euro you earn in the Netherlands is categorised into one of three boxes. Each box has its own tax rules — nothing gets taxed twice.
Your Total Income
Salary, investments, business profits, savings — all of it.
Work & Home
Income from employment, business, and your primary home.
- Salary & wages
- Freelance / business profits
- Pension income
- Social benefits
- Mortgage interest deduction
Substantial Interest
Income from shares when you own ≥ 5% of a company (BV).
- Dividends from your BV
- Capital gains on shares
- Profit distributions
- Loans from your own BV
Savings & Investments
Wealth from savings, stocks, bonds, and real estate (not your home).
- Bank savings
- Stocks & bonds (under 5%)
- Real estate investments
- Crypto assets
- Other financial assets
Step by Step
How your tax is calculated
From earning income to your final tax bill — here's the full journey in five steps.
Earn Income
You receive salary, business profits, dividends, or returns on wealth during the tax year (Jan 1 – Dec 31).
Income Gets Sorted
Each income type is automatically categorised into Box 1, 2, or 3 based on its nature — not your choice.
Deductions Applied
Box 1 allows many deductions (mortgage, self-employment). Box 2 and 3 have limited deductions.
Tax Calculated Per Box
Each box is taxed independently with its own rates. Your total tax is the sum of all three.
Credits Reduce Your Bill
Tax credits (heffingskortingen) are subtracted from Box 1 tax. The general and labour credits can be significant.
See It In Action
Real-world examples
Choose a persona to see exactly how income flows into each box and gets taxed.
Animated examples — real scenarios
Choose a persona to see exactly how income flows into each box and gets taxed. All figures are simplified approximations for 2026.
Lisa — Marketing Manager
Earns a salary, has some savings, owns her apartment in Amsterdam.
The Numbers
Tax rates at a glance — 2026
Each box has its own rate structure. Box 1 is progressive, Box 2 has two steps, and Box 3 taxes a fictitious return.
Box 1 Rates
Includes national insurance premiums in the first bracket. Various deductions (mortgage, self-employed) can lower taxable income.
Box 2 Rates
Applies only when you hold ≥ 5% shares in a company (typically a BV). The company first pays corporate tax before you take dividends.
Box 3 Rates
The Netherlands taxes a fictional return on your wealth — not actual gains. Deemed return percentages vary by asset type. The system is under legal reform.
Key Rules
Important things to know
Six essential rules that shape how the Dutch three-box system works in practice.
No Double Taxation
Each euro is taxed in only one box. Your salary goes to Box 1, your BV dividends to Box 2, and your savings to Box 3. Nothing overlaps.
Box 3 Uses Fictional Returns
Box 3 doesn’t tax your actual gains. Instead, the government assumes a “deemed return” based on asset type. You pay 36% on that fictional yield — even if you lost money.
Fiscal Partners Get Double
Married or registered partners can combine their Box 3 tax-free allowance: €114,000 together instead of €57,000 each. You can also split Box 3 income between you.
Tax Credits Lower Your Bill
Two main credits reduce your Box 1 tax: the general tax credit (algemene heffingskorting) and the labour tax credit (arbeidskorting). These phase out at higher incomes.
Your Home Is Special
Your primary residence is taxed in Box 1 (not Box 3), and mortgage interest is deductible. This is one of the biggest tax advantages in the Netherlands.
Box 3 Reform Is Coming
The current deemed-return system has been ruled unfair by the Supreme Court. The government is working toward a system that taxes actual returns, expected by 2028.
Side by Side
Quick comparison across boxes
How the three boxes differ at a glance.
| Box 1 | Box 2 | Box 3 | |
|---|---|---|---|
| What's taxed | Employment & business income | Dividends & share gains (≥ 5%) | Wealth (savings, investments, property) |
| Tax type | Progressive (real income) | Flat-ish (real income) | Flat (fictional return) |
| Top rate | 49.50% | 33% | ~36% on deemed return |
| Tax-free amount | General tax credit applies | None | €57,000 per person |
| Most common for | Employees, ZZP'ers, retirees | BV owners, DGA's | Savers, portfolio investors, landlords |
| Deductions available | Many (mortgage, self-employed, gifts) | Very limited | Debts reduce taxable base |
Watch Out
Common mistakes people make
Avoid these frequent errors when dealing with the Dutch tax system.
Common Mistakes to Avoid
Box 3 taxes a deemed (fictional) return, not your actual gains. Even if your investments lose value, you may still owe tax.
All worldwide assets must be declared in Box 3 — including bank accounts, investments, and property held abroad.
BV owners (DGA) must take a minimum salary taxed in Box 1. Only additional profit distributions (dividends) go to Box 2.
Mortgage interest on your primary home is deductible in Box 1. This can save you thousands of euros per year.
If you actively trade crypto as a business, the profits could be classified as Box 1 income instead of Box 3 wealth.