Tax implications of buying a new home in the Netherlands
Published on : 03-07-2014, 14:34 by Perfect Housing
Buying a new home can represent a significant personal investment. In addition to the costs associated with the actual purchase of a property and any ongoing mortgage payments, there are a number of tax-related implications to consider:
A property transfer tax (overdrachtsbelasting) is payable at the date of delivery when a home is purchased. This is currently 6% of the purchase price.
A yearly tax is payable on a percentage of the “deemed rental value” (eigenwoningforfait) of a home. This value is typically quite low when compared against deductions allowed for interest and is based on an official yearly assessment conducted by the municipality (WOZ value).
If you leave the country but continue to own property in the Netherlands, you no longer qualify for mortgage interest tax deductions and must pay tax on your property. In the Netherlands, all assets (e.g. investments, savings, additional properties) are taxed at the same rate. The first EUR 20.000 is tax-free, and any value above this amount is taxed at a rate of 30% over 4% (or 1,2%) of the value.
Property owners are required to pay a Municipality Property Tax (Onroerend Zaak Belasting) based on the WOZ value of their property. Both owners and rental tenants are also required to pay a number of regular taxes and charges to the local municipality, including those related to sewage, waste collection, water and pollution.
Interest payments on mortgages are tax deductible if the property is used as the primary residence and you are registered as a resident taxpayer. Mortgage interest is deductible over the amount of the mortgage, with the exception of any portion of the loan that is used to purchase furniture or other consumer goods. This tax refund can be claimed in advance and refunded on a monthly basis.
Resident taxpayers can deduct their mortgage interest pay only on their primary residence and pay a wealth tax on additional properties they own in the Netherlands. Partial non-residents, however, can also deduct mortgage interest payments on their primary residence but do not pay wealth tax on other properties.
A number of the expenses related to closing a mortgage are also tax deductible, including some notary costs (for example, costs related to finalising the contracts but not the costs of transfer).
Increases in the value a home used as a primary residence are tax-free in the Netherlands. However, if you use the increase in value to purchase another home, there may be an impact on the amount of mortgage interest that is deductible.
Expats who qualify for the 30% tax ruling are registered as non-resident taxpayers. While this may subject you to specific lending conditions, many banks view the ruling as a positive factor when considering a mortgage application and may even be willing to lend a higher amount. Be aware, however, that because expats with the 30% ruling may pay a lower tax rate, they may also be eligible for less deduction. We recommend meeting with a Perfect Financials advisor to discuss your personal situation and the impact of the 30% ruling on your ability to obtain a mortgage.
At Perfect Financials we work with partners who have a broad understanding of the tax implications of buying a new home. We are happy to introduce you to an advisor in our network who can provide personal advice and brokerage services where necessary.
Note: Be aware that tax rules can change every year.