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Written by:
Bas Hollenberg


Income tax in boxes

Income tax in boxes
For income tax purposes 3 types of taxable income are distinguished. These income types have been classified into 3 so-called boxes
The following overview shows the income, deductible expenditure and tax rates pertaining to each box.

Box 1 taxable income from employment and home ownership.
thise kind of income is taxed at a progressive rate with a maximum of 52%
Wages, pension payments, social benefits
Income from other activities
Company car
Profits from business activities
Owner-occupied property
Negative expenditure on income insurance
Negative personal allowance
Periodic benefits

In box 1 several kinds of deductible expenditures are involved:
Employee's allowance
Deduction of mortgage interest and other deductible expenditure
Expenditure on income insurance: annuities and other premiums
Offsettable losses from employment and home ownership

Box 2 taxable income from a substantial interest.
A substantial interest is if you or/and relative(spouse or parents) together own more than 5% of the shares/certificates in a incorporated company. The taxable benefit has got two variations and is taxed tot a rate of 25%:
Income from shares and profit-sharing certificates that are part of a substantial interest;
Income from the disposal of these shares and profit-sharing certificates.
These two forms of income in box 2 can be deducted by either the deductable expenses or the offsettable losses from a substantial interest.

Box 3 taxable income from savings and investments
The income from savings and investments’ is deemed a profit of 4%. The deemed profit is calculated on the average of the savings and investments. By savings and investments’ is meant the assists and liabilities fi.i savings, shares, real estate. The average of savings and investments’ is the value on 1 January and 31 December. A tax free allowance of Eur 20661 (rate 2009) is applicable.

Beside the above mentioned items there are other items which are not related to any of the boxes, these are called personal allowances.
This allowance can be offset against the income in the 3 boxes. You are entitled to personal tax allowances if you satisfy the relevant conditions. The personal tax allowances reduce your income before calculating the tax due.

You may be eligible for a personal allowance if one or more of the following items apply to you:
alimony paid and other expenditure on maintenance
losses on loans to new businesses ('Agaath' loans)
cost of living of children younger than 30
medical expenses and other extraordinary expenditure
expenditure on weekend visits by handicapped children of 30 years or older
educational expenses
expenditure on listed buildings situated in the NetherlandsDeductible expenses
Offsettable losses from a substantial interest

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