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.
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.
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