Dutch Tax Blog

Dutch Tax Blog

Tax return while living abroad

Expat tax matters mortgagePosted by Mike de Gruijl Tue, September 19, 2017 11:17:39



Living outside the Netherlands and mortgage interest deduction

If you live outside the Netherlands, have Dutch income and own a property with a mortgage, you may be eligible for mortgage interest deduction in the Netherlands. You will need to meet some tax conditions.

Qualify as a foreign taxpayer

You must qualify as a non-resident taxpayer. If a taxpayer living outside the Netherlands pays Dutch tax, he/she has the same benefits as a resident of the Netherlands. The main advantage is that he/she can then deduct the mortgage interest on the loan that he/she has on a property outside the Netherlands.

You are a qualifying foreign taxpayer if you live in an EU country, Liechtenstein, Norway, Iceland, Switzerland, Bonaire, Sint Eustatius or Saba; and:

* You pay tax in the Netherlands on more than 90% of your worldwide income

* You can submit a personal income statement from the tax authorities in your country of residence

Tax partners can either meet the conditions individually or together.

Personal income statement:

It can be difficult to obtain a personal income statement from the tax authorities in your country of residence. Particularly in countries such as Spain or Italy where the form is not recognised, and the authorities will not process it, or will process it late.

We have also found that the income statement leads to practical problems. The 90% claim is complicated, especially for foreign tax authorities. It is a Dutch tax statement and to understand it the foreign tax department also needs to understand Dutch tax legislation.

For example, the amount of box 3 income must be determined. Do you have savings in the Netherlands of ?ˇ100,000? A fictitious 4% (?ˇ4000) of this is considered as foreign income, which makes it harder for you to meet the 90% condition. However, if you have a Dutch holiday home with a value of ?ˇ100,000 rather than the money in savings, then the ?ˇ4,000 is seen as Dutch income. This is because the double tax treaty gives the country of residence the right to charge tax on savings and the country where a property is situated the right to charge tax on the property.

Term of the loan

As of 2013, interest deduction is still possible, provided you pay at least the annuity or linear payments and that the loan is repaid within 30 years. For loans taken out before January 1, 2013, transitional law is provided and this requirement does not apply. For a loan existing before 2013, the above-mentioned requirement of qualifying foreign tax liability will only apply from 2015.

If you have a loan in a foreign country, you must inform the Dutch tax authorities. This is because foreign banks do not have to share the information with the Dutch Tax Authorities like Dutch banks do. If you do not mention that you have a loan, you will not entitled to deduct the mortgage interest.

A foreign mortgage with Dutch conditions

If you are living abroad, it is very important to choose a mortgage that meets the Dutch conditions if you want to deduct the mortgage interest rate in the Netherlands. As of January 1, 2013, a repayment-free (interest only) mortgage does not qualify.

Conclusion

If you live outside the Netherlands and qualify as a foreign taxpayer, it is possible to deduct the mortgage interest you have paid in your Dutch tax return under the terms of your tax return. This can, depending on your personal situation, lead to saving many thousands of euros in tax. However, if the mortgage started after 2013 it needs to meet certain specific conditions.

Looking for more information please visit our website www.tssolutions.nl







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Mortgage Stress? NO WAY!

Expat tax matters mortgagePosted by Mike de Gruijl Tue, December 13, 2016 10:16:55

Tax & Service Solutions offers you a unique service in a close cooperation with De Boer Financial Consultants

Did you ever wonder who knows more about your financial situation than your tax advisor?
Right!

In FVB de Boer we found a business partner with the highest level of knowledge and service when it comes to expat mortgages in The Netherlands.
This is why Tax & Service Solutions and FVB de Boer cooperate together and you will benefit all the knowledge of 2 different worlds combined in one unique service!

Stress

If you ever applied for a mortgage it is likely you experienced a lot of stress collecting all the required documents and information your mortgage advisor asked you to. Not to speak about the long processing time and the additional documents you needed to collect.
When finally having a mortgage your tax advisor started asking information about your mortgage which sometimes wasn't even provided to you by your mortgage advisor..... Applying for the monthly tax return and filing your annual tax return wasn't as easy as your mortgage advisor told it to be.

Advice

Searching for the best advice and mortgage offers often turns out in meeting up with multiple mortgage advisors and explaining your financial/personal situation over and over. Sometimes you even discover that the advice given to you wasn't that complete or good as you hoped for!

Benefits

Both Tax & Service Solutions and FVB de Boer were convinced that this had to change in your benefit as our client. During 2016 they started a cooperation in which they combined the best of both worlds (taxes and mortgage) in a one stop service. The results were above all expectations:

- Easy final approval for most mortgage applications
- Quick turnaround of the mortgage application (on average 3 weeks)
- More accurate and easier tax filings
- LESS STRESS for our clients

Question

We believe you should always ask yourself the question "Why all the stress when there is a high level service out there which provides me all the benefits I need without the stress?"

This is why Tax & Service Solutions and FVB de Boer will continue this high level service for you as a client so the only things you will have to be concerned about are the nice things when buying a house!

Want to learn more about the tax-mortgage service? click here for more information





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Maximum mortgage and taxes

Expat tax matters mortgagePosted by Mike de Gruijl Sun, November 20, 2016 15:23:10

More and more expats are seeking for a home which they own themselves. Financing a property with a mortgage can be very different compared to your home country.


A lot of expats know that the rules in The Netherlands give more possibilities to finance a property compared to other countries but Dutch banks are not endless when it comes to the maximum mortgage they are willing to lend you.

European Bank & IMF

Because of the fact the European Bank and IMF still think that our property market is way over-financed the Dutch government decided a few year ago that the maximum mortgage which people could apply for had to be reduced to a maximum of 100% of the market value. The effect is that you only have until December 2016 to apply for a mortgage of 102% of the market value of your new home. Next year the maximum mortgage will be reduced to 101% and in 2018 the maximum will be 100%.

Because of this change in rules not everybody is able to finance a house with a mortgage. Simply because they don't have enough cash or savings to make a deposit on transfer date to cover all the costs involving the purchase of a house and the finance costs.

Misunderstanding

A big misunderstanding is that borrowing more than the maximum mortgage will resolve in losing your tax deduction on the additional loan you will need to cover the costs for buying a house.

Fortunately this is not the case. As long as you make sure your loan has a repayment schedule it is still possible to borrow money, for example in a personal loan, to cover the costs and which exceeds the maximum mortgage the bank are able to lend you. The Dutch tax authorities don't look at the loan compared to value and stick to different rules when it comes to determine wether or not the interest paid on the mortgage is tax deductible.

Personal loan

However you always must keep in mind that a personal loan will effect your maximum mortgage in a negative way (the maximum possible mortgage based on your income and financial situation will decrease when taking in account your personal loan) and the monthly obligation is usually set at 2% of the credit limit or total of the personal loan.
A possibility could be to apply for a bridging loan at a family member and after transfer date apply for a personal loan at a different creditor. Just as long as you keep in mind that from day one you must have a repayment schedule agreed with your creditor to be able to deduct the interest of the additional loan.

It is always recommended to check your possibilities with an independent financial advisor to see if your dream house is still possible for you to finance with the scenario mentioned above.

Want to learn more about your possibilities? Tax & Service Solutions are here to give you the best advice on all your financial matters. We work together with the best business partners.
Check our website https://www.tssolutions.nl





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WOZ value increases in The Netherlands

Expat tax matters mortgagePosted by Mike de Gruijl Mon, August 22, 2016 16:50:11


The average WOZ value of houses in The Netherlands are increasing for the first time since 2010 this year again.

On January 1, 2016, the average WOZ value was € 209,000 euros, an increase of 1.5 percent from a year earlier, mentions the Central Bureau for Statistics (CBS) last Thursday. More information on the WOZ value can be found in this blog.

The WOZ value is determined by municipalities and affects the height of a number of taxes, including the property tax (property tax), income tax and sewerage charges.

In 2010, the WOZ value was set at an average of 242,000 euros per house. Then a long decline began. The WOZ value is still almost 14 percent below the 2010 level.

House prices have been working its way up. The development of the WOZ value follows that of owner-occupied homes with about a year delay.

This is because property belonging to the housing stock on January 1, will be valued at the value of 1 January of the previous year. Also rental properties are taken into account in determining the WOZ value.

Amsterdam

In Amsterdam, the average house value increased by 9 percent last year, the strongest, from 232,000 euros to 253,000 euros per house. Elburg was the most dramatically. Here the real-property value went down by 9.2 percent.

The provinces of North Holland, South Holland and Limburg showed the strongest increase last year , while the average house value in Gelderland and Groningen remained the same.

The average WOZ value is highest in the province of Utrecht with 243,000 euros. North Holland and North Brabant with 240,000 euros and 227,000 euros respectively stand in second and third place. Houses in the province of Groningen show, with an average of 155,000 euros, the lowest WOZ value.


More information about the WOZ value and the effects of this value on your personal tax wages can be found at Tax & Service Solution's website www.tssolutions.nl



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Higher mortgage 2-income households in 2017

Expat tax matters mortgagePosted by Mike de Gruijl Sun, August 21, 2016 10:46:07


From 2017, two-income households can take out a higher mortgage than currently is the case.

Currently a second income is in taken in to account for half when applying for a mortgage. Next year it will be increased to 60 percent.

The Ministry of Finance confirms that this proposal for consultation was submitted to mortgage lenders and mortgage advisers.


Every year
Every year the Ministry of Finance looks if the rules on mortgage loans have to be adjusted. The proposal to take in account the second income for a higher percentage count is part of that.


Loan to value
Also, next year, according to the VEH (Vereniging Eigen Huis) in some cases it will be possible to get an exception for so-called loan-to-value ratio, the ratio of the amount of the mortgage and the value of the house. Which for this year is 102 percent and will be reduced in 2017 to 101 percent.

The exception applies to buyers and owners of houses that need "necessary improvements to security," said the VEH. This concerns, for example foundation repairs or roof reconstructions.


January 2017

Mortgage lenders and mortgage consultants can respond until 22 September 2016 at the proposal made by the Ministry of Finance. As of January 1, 2017 all new rules will be effectuated.


Provided to you by Tax & Service Solutions





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Notional rental value

Expat tax matters mortgagePosted by Mike de Gruijl Fri, July 29, 2016 15:45:25


This is why you can't deduct the full interest payments from your gross income.


In this article I will try to explain in a very simple way how the Notional rental value works and what effects it has on your mortgage payments deduction.

What a lot of expats in The Netherlands don't realize when they buy a house is the fact that when they own a house. there income will be fictively increase with the notional rental value of the property. In Dutch it is called "eigenwoningforfait" The notional rental value is a percentage of the WOZ value (The WOZ value is the value of the property as determined annually by the municipality based on market developments on the housing market in certain neighborhoods and streets).
The percentage is based on the actual value of the property the year before. For example if you are filing your taxes in 2015 you will need the WOZ value of your property over the 2014 in order to determine with which percentage of the WOZ value you will need to calculate. The most common rate is 0,75%. Below you'll find the different scales with the percentages based on the WOZ value.

-

€ 12.500

0%

€ 12.500

€ 25.000

0,30%

€ 25.000

€ 50.000

0,45%

€ 50.000

€ 75.000

0,60%

€ 75.000

€ 1.050.000

0,75%

€ 1.050.000

-

€ 7.875 + 2,35% over the excess of € 1.050.000

Like mentioned above most people will be likely to pay 0,75% of the value. If we take a closer look on what effect this has on your tax return you will understand why not all interest payments are tax deductible. For example;

Your yearly gross income is € 50.000,- (=max 42% tax wages)
Your mortgage (interest only) is € 125.000,- with an intrest rate off 2,5%
The WOZ value of a property is set at € 100.000,- which means your income will be increased with 0,75% of this € 100.000,-. This makes your income € 50.750,-. Because your employer only withheld taxes based on your salary it is like that you will have to pay an amount of 42% of this € 750,- which is € 315,-. (keep this € 315,- in mind)

The annual interest payments are a total amount of € 3.125,- This means that you can decrease your income with this amount to € 46.875,-. If there was no notional rental value value you would have paid € 1.312,- taxes wages to much on your salary because your employer withheld taxes based on the € 50.000,- and received this amount back from the tax authorities.
However because in this case the notional rental value is € 315,- you must deduct it from the € 1.312,- which means you will "only" receive an amount of € 997,-.

Unfortunately not all mortgage advisors or real-estate agent mention this when you are busy buying a house.

Please note that the above is a very simple explanation on how the notional rental value works in the Dutch tax system and we are happy to support you with our tax return services at Tax & Service Solutions.

More information or contact can be found at www.tssolutions.nl





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