The tax burden in the Netherlands compared to that in Thailand
In Thailand blog I regularly read that the tax burden for income tax in the Netherlands would be much higher than in Thailand.
About a year and a half ago, a few articles even appeared in Thailandblog, in which the writer tried to show that the tax burden in the Netherlands would exceed that of Thailand. In his otherwise glowing argument, however, he failed on all fronts to demonstrate the correctness of his claim.
Although there was a lot of resistance to his claim at the time, in addition to much acclaim, this myth still hovers somewhere over our heads, as this noise resurfaces with some regularity. Even very recently.
In itself, such a claim is not such a strange idea, given the level of facilities in the Netherlands compared to that of Thailand. However, that does not make this claim correct. The opposite is the case, as will be seen.
With this contribution I will therefore try to put an end to this myth, because in the vast majority of cases it is completely false. This applies in particular to those with a taxable/gross income of up to € 42.000, and we are talking about the vast majority of Dutch people living in Thailand. So it's about time we stopped spouting this fallacy once and for all!
PREFACE
Almost every week I advise Dutch people about the tax consequences of emigration to and remigration from Thailand. If you are not yet 65 years old when you emigrate, the tax burden in Thailand often turns out to be considerably higher than when living in the Netherlands.
Incidentally, I also regularly come across this picture during emigration to and remigration from other 'foreign countries'. In this contribution, however, I limit myself to the situation with regard to Thailand.
At the age of 65 or older, the figures are closer together as a result of the additional deduction of THB 190.000, but even then the tax burden in Thailand is still higher in most cases than in the Netherlands. If you are already entitled to state pension, the differences will increase again.
I realize all too well that many more factors play a role in an emigration to Thailand than just the tax consequences. But that's not what matters to me right now. In this contribution I will only discuss the tax consequences, in particular with regard to the tax burden for income tax when living in the Netherlands with that of living in Thailand. How it relates to other and personal interests is a matter that only the person concerned can judge.
DO NOT COMPARE APPLES WITH PEARS
What I have of course not included in the following calculations are the national insurance contributions, such as the AOW premium and the premium for the Long-Term Care Act. This also applies to the income-related healthcare insurance contribution. Otherwise I would be comparing apples to oranges.
After all, within the Personal Income Tax (PIT) you do not accrue a retirement provision comparable to the state pension. In addition, the PIT does not include amounts related to health insurance or costs for long-term care.
It therefore only concerns the tax burden due to the Dutch income tax when living in the Netherlands compared to that of the PIT when living in Thailand. Simply put: for what you do not 'buy' in Thailand with your PIT, you must also leave out the Dutch price tag. Otherwise you are comparing apples with oranges.
If I were to buy 4 round steaks with a total weight of 500 grams for the price of € 10 from butcher A this week and 2 round steaks with a total weight of 250 grams for the price of € 7,50 from butcher B the following week, then I could hard to say that butcher B is cheaper.
EMIGRATE
In the elaboration below I assume a single man of around 60, who after more than 40 years of hard work thinks it's nice enough and wants to emigrate to Thailand.
Financially nothing stands in his way. In those 40 years he has built up a nice pension of € 25.000 gross per year, which will give him sufficient financial scope in Thailand. For the years prior to his state pension age, he wants to take out voluntary state pension insurance with the SVB, so that he does not end up with an state pension shortfall.
All very sensible and a story I come across regularly.
The Thai tax system can be compared to that of the Netherlands before 2001. This means: with many and often high reductions, deductions, an exemption of THB 190.000 for 65 years and older and a tax-free allowance.
The Thai system has major objections or inequity. Higher incomes are thus most favored by a reduction in the marginal rate/tax burden.
As of 2001, the Netherlands has replaced this with the system of tax credits and allowances. These tax credits and allowances are income-sensitive. As taxable income rises, they decrease until ultimately there is no longer any entitlement to these provisions. In addition to a progressive rate, the Netherlands has also had a degressive system of tax credits and allowances since 2001.
In the following calculations I only include the tax component of the tax credits and do not take the allowances into account.
LIVING IN THAILAND WITH THE RIGHT TO A COMPANY PENSION BUT NOT YET ENTITLED TO AOW, COMPARED WITH LIVING IN THE NETHERLANDS
The example calculation below is therefore based on:
- a single man;
- age 60 years;
- a gross company pension of € 25.000 per year;
- average rate for 2021 of THB 38,760600.
I calculated the Dutch income tax at € 1.098.
[gview file=”https://www.thailandblog.nl/wp-content/uploads/belAfbeelding-1.pdf”]
In this case, the Personal Income Tax amounts to € 1.981 and is therefore around € 900 higher than the Dutch income tax.
[gview file=”https://www.thailandblog.nl/wp-content/uploads/belAfbeelding-2.pdf”]
But even if you are 65 years old and are therefore entitled to the extra deduction of THB 190.000, while you are not yet entitled to an AOW benefit, the PIT will still contribute € 25.000 against € 1.170 with a gross income of € 1.098. XNUMX in Dutch income tax.
[gview file=”https://www.thailandblog.nl/wp-content/uploads/belAfbeelding-3.pdf”]
LIVING IN THAILAND WITH A RIGHT TO AN AOW BENEFIT AND PENSION COMPARED WITH LIVING IN THE NETHERLANDS
Here I again assume an annual income of € 25.000, but then divided into an AOW benefit of gross € 12.500 and a pension benefit of also € 12.500.
In that case, the Personal Income Tax is still € 1.170.
If you live in the Netherlands, the income tax on this income is €643, which is €527 lower than the Personal Income Tax.
[gview file=”https://www.thailandblog.nl/wp-content/uploads/belAfbeelding-4.pdf”]
Of course, I have not taken into account the possibility that you did not contribute your entire income to Thailand in the year in which you enjoyed it or the reduction provision with regard to your state pension under Article 23, paragraph 6, of the Dutch treaty concluded with Thailand for the avoidance of double taxation and which I previously wrote about in Thailandblog. After all, this contribution is about the tax burden in the Netherlands, compared to that in Thailand, assuming equal bases of taxable or gross income and then based on Dutch or Thai tax legislation. The double taxation treaty concluded between the Netherlands and Thailand does not play a role in this.
CONCLUSIONS
- If your taxable income remains within the first two brackets for income tax and you are not yet 65 years old, you will be considerably cheaper in the Netherlands with regard to income tax than what you owe to Personal Income Tax in Thailand. This concerns a gross income of a maximum of € 35.129 (norm 2021 2e disk).
See images 1 and 2 (€ 1.098 living in the Netherlands against € 1.981 living in Thailand).
Do you fall into the 3e or even 4e Then the tide gradually turns, as the percentages for national insurance contributions will then lapse and be transferred to the income tax rate, while some tax credits will decrease and eventually even disappear completely. The turning point is at a taxable/gross income of around € 42.000.
- If you are 65 or older, the tax burden in Thailand is also higher than in the Netherlands. This applies even more if you have reached the state pension age.
With regard to the latter, see Figures 3 and 4 (€ 1.170 if you live in Thailand compared to € 643 if you live in the Netherlands).
- On April 19, 2016, on the proposal of the Minister of Finance, the Thai Council of Ministers approved a drastic expansion of the reductions and deductions and an adjustment of the bracket rate, starting from the 2017 tax year.
This extension was intended as a temporary relief of the tax burden and was established by Royal Decree (KB), without amending the Revenue Code. However, it still applies.
The provision of this extension by Royal Decree is therefore the reason that the amounts and percentages included in the Revenue Code are no longer in accordance with current practice in Thailand. This also applies to the amounts and percentages as stated on the website of the Revenue Department.
All this makes the relatively high tax burden in Thailand all the more remarkable. Before 2017, the differences between Thailand and the Netherlands were considerably further apart.
In order to indicate the effect of the aforementioned reduction in the tax burden with effect from 2017, I have made a calculation of the PIT, assuming an old age pensioner with an annual income of € 25.000, as shown in Figure 3. In that case, the PIT would not have amounted to € 1.170. amount to only double, namely € 2.347. That compared to the Dutch income tax of € 643 (see figure 4) shows a huge difference. But that was the situation before 2017!
This high tax burden is due to the lack of an exemption of THB 2017 for 190.000 for those aged 65 and older, a reduction of 40% with a maximum of THB 60.000 instead of the currently applicable 50% with a maximum of THB 100.000 and a reduction as a single person of THB 30.000 instead of the current THB 60.000.
- The difference in tax burden is further reinforced by the fact that more than 40% of AOW benefits are financed from general funds or taxes. As already stated, no room is included in the PIT for financing an old-age provision comparable to the state pension, while you may assume that this is the case with regard to Dutch income tax.
In addition, mainly via income tax in the Netherlands, a shift of incomes is taking place from the high(er) incomes to those who have little or no income of their own. Consider, for example, welfare benefits.
In my criticism of Thailand's tax system (many and high reductions, exemptions, deductions and a tax-free sum, which work to the advantage of higher incomes), I already pointed out that the Netherlands has introduced a system with tax credits as of 2001 and surcharges. I have not included the allowances, such as the rent and healthcare allowance and many more, in the calculations of the tax burden. However, they must be financed, mainly from income tax revenues!
Of course I also make the calculations for the prospective emigrant/remigrant, taking into account the Treaty concluded between the Netherlands and Thailand. This also includes the reduction to be granted by Thailand under Article 23(6) of the Treaty in respect of any state pension or other social security benefit. But that is independent of the tax burden arising from Dutch or Thai tax legislation.
More information
Lammert de Haan, tax specialist (specialized in international tax law and social insurance).
A true word, mathematician Lammert! Thanks for these numbers.
A very expert report, only; How come I hear so many “stories” from Dutch people who have been deregistered, and they receive their benefits (wao, state pension + pension) gross/net, and pay virtually no tax here (Thailand).
Am I doing something wrong??
Lunghan, those are indeed, what you say, 'stories' and also 'from the old box'. WAO and AOW are taxed in the Netherlands anyway. If Thailand also levies, a reduction must be granted by Thailand, but that is another story. Net-net applies to occupational pensions.
If you can demonstrate that you pay tax in TH, on benefits and pensions, for example, you can apply for an exemption from payroll tax and premiums, which will then also be provided to you.
Example of myself from 2021
If you have some savings, you can decide for yourself how much or how little tax you pay in Thailand, legally.
For example, as a person over 65 you make 40.000 baht every month, which is 480.000 baht per year. Exemption for this age is 500.000 baht so you stay below the tax limit. If you also have a savings account in Thailand from which 15% withholding tax is deducted, you can reclaim that in whole or in part from the Thai tax authorities. Then you are liable to tax in Thailand and you can apply for an exemption in the Netherlands.
You save the rest of your pension and transfer it in one go in the following year, for example in January, which is savings and is not taxed in Thailand.
This in telegram style, Lammert can explain it to you in great detail.
Han, you misread what Lammert wrote: 'Of course I didn't take into account the possibility that you didn't contribute your entire income to Thailand in the year you enjoyed it…'
This concerns the comparison of the tax burden on income in NL and TH. Lammert has written here before about the technique you mentioned.
Eric, you obviously misread my answer. I am not responding to Lammert here but to Lunghan who wonders how some people can live here practically tax-free. And I gave him that answer.
Han, that's why I always add a name when I respond to someone. That prevents misunderstandings.
But otherwise you are right: if you have savings, you can play it in such a way that the income to be taxed in Thailand just falls into the zero-% bracket. Then the tax is zero and you get the withholding taxes back.
A good and neat explanation of the tax differences between Thailand and the Netherlands by Mr. de Haan.
Over the years I had many discussions with the Foreign Revenue Service in Heerlen. I never got a decent response.
To resolve the issue of who to pay tax to, I made my own calculation according to the Thai tax return rules with the help of a Thai accountant. Ultimately my conclusion was that in my situation it hardly made any monetary difference whether I pay taxes in the Netherlands or in Thailand.
I chose to pay in the Netherlands to get rid of the nagging and not have to enter into discussions every few years.
Christiaan, to put it in plain English: you have no choice! The treaty determines where the tax liability lies.
You wanted to get rid of Heerlen. I assume you wanted to get rid of the discussion about the payroll tax exemption? So you agree with payroll tax even if it takes place on income allocated to Thailand? And you don't reclaim that payroll tax by filing a tax return on the C form at the end of the year and claiming an exemption there?
Well, then you deserve a ribbon! The treasury likes such people.
But IF, because I do not know the composition of your income, IF that income is taxed in Thailand, then you are committing fraud and that can get you into trouble. I think it makes sense to have a Dutch expert take a look at it.
@Eric,
You're going very short here...
If the income -according to all applicable rules- is taxable in Thailand and if you do not declare this to the Thai tax authorities, then you really are not committing fraud.
Fraud means acting with premeditation. If you have not made a declaration in Thailand due to "not knowing" or "unclear regulations" or "other cause", then that is certainly not fraud. But rather, just like in NL, a violation for which there is a fine.
(Incidentally, this also applies to all those fellow citizens who do not currently pay tax in either NL or TH. These are also not included in Lammert's equations.)
@Christian,
A fairer solution and in the longer term a more solid solution to your tax problem is: “just” pay taxes in Thailand. You can then obtain a Certificate of Residence (COR21/22) from the TH tax authorities. You then send it to Heerlen, after which Heerlen grants you an exemption of 5 years.
You can of course criticize all kinds of elements of the Thai income tax system, but you have to be complete. If you earn no more than 150.000 Baht per year as a Thai, you do NOT pay income tax. For small self-employed people, that amount is 300.000 Baht.
I don't have the numbers to hand, but I estimate that this concerns more than half of the Thai population. The fact that the system is therefore in favor of the high incomes deserves qualification.
Furthermore, I think it is a major advantage of the Thai system that it is simple, very simple compared to the Dutch system, which is full of additional rules, exceptions for which you have to save receipts and emails all year round. This is not only to the benefit of the state but certainly also to the benefit of the taxpayer. I sometimes got so fed up in the Netherlands that I just filled in the basic data and probably paid too much, but with less annoyance. Filling in my data on the Thai website takes me 10 minutes. In the Netherlands that took days... or a tax advisor who canceled out the lower income tax that I paid in the Netherlands due to Thailand with his account.
https://www.rd.go.th/fileadmin/user_upload/AEC/AseanTax-Thailand.pdf
Chris, what's not complete in the article? In the comparison, I assume the same tax base/income to be taxed. Otherwise you are comparing apples with oranges.
The fact that the Thai tax system favors the higher incomes does not need any qualification. That's just a fact. The exemption for 65 years and older or disabled and the many reductions and deductions not only make the Thai system complicated, but also weaken the progression in tax rates, in contrast to the Dutch system.
Since 2001, the Dutch system has only had a very limited number of deduction options. The progressive rate therefore remains intact. On the other hand, there are tax credits and allowances, both of which decrease when taxable income rises.
Dear Lmmert,
You compare the situation of a DUTCH PERSON who either pays tax in Thailand or in the Netherlands, or in both. But the Thai tax system is NOT made for foreigners but for Thais. The Thai who earns no more than 150.000 baht per year pays NO income tax. And that's about 50% of the population. Imagine that 50% of the 'poorest' Dutch people pay NO income tax in the Netherlands.
Now EVERY foreigner here has more than 150.000 Baht income per year. On that basis you should NOT conclude that the Thai tax system is by definition in favor of the rich.
Based on comparisons of the WHOLE system, you could say that the Thai system supports the poor much more than the Dutch system. You even have to pay tax in the Netherlands on a benefit.
Hi Chris,
Unfortunately you are confusing a few things. I compare the tax burden of a taxpayer who falls fully under the Dutch tax system and therefore lives in the Netherlands, with the tax burden of an unlimited taxpayer who lives in Thailand. After all, it concerns a comparison of the tax burden resulting from the Dutch tax system with that of Thailand.
Contrary to what you state, the Thai tax system is not made for Thai. Not even for foreigners, but only for taxpayers. In addition, the Thai Revenue Code has no discriminatory provisions against foreigners.
What strikes me is that you do not know either the Thai system or the Dutch system.
You write that the Thai (of course must be the taxpayer because that also applies to the foreigner living in Thailand) who earns less than THB 150.000 does not owe any income tax. I can reassure you: if he is already 65 years old or disabled, he can earn THB 500.000 a year before he has to pay taxes. And THB 250.000 can be added to that if he is married, his wife has no income of her own and is also 65 or older. That is quite different from the THB 150.000 you mentioned!
You write that you even have to pay tax on a benefit in the Netherlands. I have to disappoint you in that regard.
If, as a single AOW pensioner with a not too large supplementary pension, your taxable income remains below € 18.836, you will not pay any income tax in the Netherlands. And that is quite different from what you claim!
You should not make the mistake (which I do encounter in some responses) by assuming that you live in Thailand. In that case, you do pay income tax on your AOW benefit. You then miss out on the right to tax credits. But that has nothing to do with a comparison of the tax burden resulting from the tax systems of the Netherlands and Thailand
If, as a 65-year-old or older, you bring in € 18.835 in income in Thailand, the Personal Income Tax due on this amount is € 400,03. € 400,03 in tax when living in Thailand is more than € 0 when living in the Netherlands.
In these calculations I use the same rate for the baht as the calculations included in the article.
Also with your comment that the Thai tax system supports the poor more than the Dutch tax system, you indicate that you do not know both systems, because the opposite is true.
The Netherlands has a progressive income tax rate. The same goes for Thailand.
Subsequently, since 2001, the Netherlands has applied a reduction of the final tax due in the form of tax credits. The progression in the rate is not affected. These tax credits are even quite degressive.
Just like the Netherlands before 2001, the Thai tax system uses the system of many and often high exemptions, reductions and deductions. These immediately affect the progression in the rate setting and therefore work in favor of higher incomes.
This is also the case in the Netherlands with regard to the small number of deductible items. Someone with a high income and therefore a high marginal rate will receive much more tax money back from their mortgage interest than someone with a low income. Fortunately, the Dutch government put a stop to this a few years ago by limiting the rate that applies to the deduction of mortgage interest. But for Thailand this system still applies in its entirety.
The Thai system with its many and often high deductions therefore works in favor of high(er) incomes. And who now benefits from the weakening of progress in the Thai system? That is not the Thai with often no or only a small income to be taxed. This advantage is mainly enjoyed by the many foreign taxpayers living in Thailand. Their income is usually well above that of the average Thai.
At this point, there is a lot to modernize the Thai tax system and a lot of room can be created to really support the poorer Thai population, because, contrary to what you claim, there is little or no evidence of that at the moment. Thailand does not have social assistance benefits comparable to the Netherlands or any other social provision with little or no income! In addition, Thailand has no surcharges for low(er) incomes.
In this respect, many countries have already preceded Thailand in modernizing their tax systems. I don't come across the Thai system much elsewhere.
Of a completely different order is the question of why the tax burden resulting from the Thai tax system is in most cases higher than that of the Netherlands. You have to look for the answer in the 'law of large numbers'.
A large proportion of taxpayers living in Thailand (sometimes including foreign residents) do not get around to paying Personal Income Tax due to the level of income. And I am certainly not talking about the inadequate or missing enforcement system of the Thai tax authorities.
This means that only a small proportion of the inhabitants have to cough up a large amount of tax to keep the Thai government running or to get a balanced budget and bill.
With a gross income of € 12.900, you will not be able to pay PIT as a 65-year-old or older. And then it's not just about the Thai population.
I have around 50 clients living in Thailand, often with a Thai partner.
In principle, I do not have to file a declaration for the PIT for two of the Dutch people because their income is below € 12.900. However, their Thai partners enjoy an income that is more than sufficient to file a tax return for them.
In addition, contrary to what I read in some responses, filing a Personal Income Tax return takes considerably more time than filing a Dutch income tax return.
Who among the Dutch living in Thailand knows the tax legislation of Thailand with its many possibilities of reductions and also makes full use of it?
Which Dutch person living in Thailand can make a calculation for the reduction to be granted by Thailand on the basis of Article 23, paragraph 6, of the Treaty for the avoidance of double taxation concluded by the Netherlands with Thailand, in respect of a Dutch social security benefit (including an AOW benefit) ? I dare say almost no one, with the result that you pay too much tax in Thailand.
I have of course automated these matters so that I can compile a declaration for the Personal Income Tax in a relatively short time. But even then this requires more time than compiling its Dutch counterpart, which is made considerably easier by means of the pre-filled data and amounts and the fully automated calculations of the tax credits and the final amount of income tax due. Unfortunately, this is missing in the Thai form PND91!.
I looked at my Thai tax return.
However, that was not brought in 25.000 euros.
Money brought into Thailand 460.265,73 Baht. (no state pension yet)
Tax 6.263.29 Baht.
Calculated at a large office and checked at a head office, so I assume the calculated tax is correct.
For lower incomes, the Thai tax seems more attractive to me.
But the tax brackets in Thailand are very short, so for higher incomes the percentage quickly adds up.
Ruud, against an annual income of THB 460.265,73 brought into Thailand, there may very well be an amount to be paid in Personal Income Tax of THB 6.263,29.
You write that you do not yet have a state pension. But you are not yet 65 years old. Then you have to deal with a deduction of THB 100.000 as acquisition costs and a personal deduction of THB 60.000. Then I have to 'bring home' an amount of THB 25.000 as a deduction.
This may be included in the maximum deduction of THB 15.000 for Thai health insurance and a deduction of THB 10.000 for Thai life insurance. But it is also possible that you have donated THB 10.000 for the maintenance of the Royal palaces and gardens.
With these deductions you arrive at a taxable income of THB 275.265,73, which results in an amount of Personal Income Tax due of THB 6.263,29.
At lower incomes, the differences in percentages persist, but obviously not in 'cents'. The turning point is at a gross/taxable income of around € 42.000.
I just looked at the specification, there is a deduction of 25.000 Baht for health insurance.
That's right, Ruud. As of the 2020 tax year, it has been increased from THB 15.000 to THB 25.000. I hadn't looked at that for a while because people usually have foreign insurance (mostly European / French) and therefore without deduction.
Nice story Lambert. But under the tax burden, we ordinary Dutch people do not only include income tax, but all conceivable taxes and excise duties that apply to our daily lives.
And then there are not only the national 'taxes', but also local taxes such as property tax, sewerage levy, waste levy and water board taxes.
HI Lammert — Thanks for these comparisons. Do you also have a whatsapp number so I can call you in if necessary? Regards Alex
Hello Ales,
You can contact me at [email protected].
This clear piece is purely about income tax burden for an unmarried man aged 60 with a top income by Thai standards. Not surprising that it is taxed more heavily in Thailand compared to NL.
If we take the tax burden in terms of VAT, then that 900 euros per year is quickly “earned back” If one spends 15 ka 21% VAT, it costs 3150 euros in the Netherlands, while it costs 1050 euros in Thailand, provided everything is purchased from a VAT-paying company.
The feeling that people have that the tax burden is lower in TH than NL is therefore, I think, explainable and certainly for people who smoke but do not drink.
Also here in Changmai there is a lot of talk about people paying less tax here in Thailand.
Unfortunately I have to drop out in that conversation, I don't understand it at all.
Also because I have a government pension and AOW, and still have to file a tax return in the Netherlands, if
foreigner.
Then do it with a pre-filled statement, but check whether it has been filled in correctly.
You don't have any deductions, that's not possible.
What is an advantage, my assets in the bank, I do not have to declare.
Hans van Mourik
I get confused by this calculation because the income tax for 25.000 euros is 2362,50 euros.
As a deregistered Dutchman, I pay 9,45% income tax, which is 2362,50 and considerably more than 1098 euros.
I hope you can explain that to me.
That is probably due to the tax credits as Lammert indicates in his position above.
But apparently you are not entitled to this as a deregistered Dutch citizen.
I think this piece is about Dutch people living in Thailand and then you are not entitled to a tax credit or is that new?
I myself am taking early retirement through the ABP government personnel and do not yet have an AOW and officially deregistered.
It is impossible to get a tax credit because I don't have to pay it and I don't have to pay WLZ either.
The only thing that is withheld is income tax (9,45%) in the first bracket.
Savings are untaxed even if there are millions on them.
It is a beautifully written informative piece, but for me it is again comparing apples with pears.
I can certainly explain that to you, Hendrik, but it is also clearly indicated in the article and you can also verify it by means of the posted images/calculations.
For a comparison of the tax burden resulting from the Dutch system and the Thai system, you must assume an equal amount of taxable income if you live in the Netherlands (the Dutch income tax) on the one hand and live in Thailand (the Personal Income Tax) on the other.
As I have already indicated, I live in Thailand and only pay income tax in the Netherlands and if you include payroll tax credit in your comparative calculation, I think that on the other hand you should also include the social security contributions and long-term care that I no longer pay.
I want to leave it at this because I have no choice because ABP Government has to pay income tax in the Netherlands, but I am very happy that I no longer have to pay Social Security and WLZ.
You also do not have to declare any savings in your tax return, which is a lot of money for some.
Hendrik, if you had read the calculations carefully, you would have seen that I only included the tax component of the tax credits.
What you don't 'buy' with the PIT, you should also disregard the Dutch price tag. This therefore applies to both the national insurance contributions and the income-related Health Insurance Act contribution. Naturally, I therefore also had to disregard the premium component of the tax credits, which I did.
Hi Lammert, you made your point. Congratulations!
However, income tax in the Netherlands consists of several components. You have covered box 1. If you also include the other types of income, I don't know where the tax burden is the highest.
1) Equity [box 3] – [holiday] home, savings and/or investments.
In Thailand, the real fruits [interest/dividend/rent] are taxed, while in the Netherlands a fictitious return is used that is unfair to many. I think that as a rule wealth in Thailand is taxed more fairly and less heavily.
2) And then you have the protective assessments – on supplementary pension such as annuity, pension or ODV via BV and substantial interest. Think of this as deferred income tax from the past.
The unfairness of these assessments is that if you want to pay this, you are not allowed to spread the payment over the same number of years that you have accrued it, so that you fall for a very large part in the highest rate on the sum - now 49,50% . While in the past this usually fell under a lower rate for me due to the accrual over several years [e.g. 42%].
I have indeed limited it to box 1, Eddy. But I understand from a number of responses that that is already difficult enough.
What you write about the protective assessment is incorrect. Other than what you write, you don't have to pay these. You get a delay for that. If you have not performed a 'prohibited act' in the ten years following the imposition of this assessment, the protective assessment will be waived.
A prohibited act is understood to mean the surrender of your pension or annuity payment. With the exception of the small and permitted commutation of pension rights, no pension provider will cooperate in the commutation of a pension. This is different for annuity payments. In that case, the protective assessment can be partly realized, provided that the deposit or the premium paid for the annuity payment has been deducted from the income to be taxed. This is often not the case because of the often very limited annual scope, as a result of which the premium paid could not be deducted from the income to be taxed.
The judgment of the Supreme Court of 14 July 2017 also plays a role here, in which a further restriction has been introduced in the tax right of the Netherlands when living in Thailand, among others.
Many protective assessments, namely those before July 14, 2017, have partly lost their legal validity.
Hi Lammert, thanks for your correction. This is starting to get complex.
It is indeed an annuity payment. I don't want/need a postponement, because after 10 years of remission I'm 78 and I don't know how long I can still enjoy the benefits.
I lost you with the following sentence “Then the protective assessment can …”.
My question is: is my benefit taxed on the basis of the rate of the one-off protective assessment [usually the highest bracket], or on the basis of the rate of my total income in the year of the benefit?
Another thing, as far as I know, assessment for a substantial interest is not waived.
Hello Eddie,
With the sentence: “Then the protective assessment can ………….” I am referring to the fact that this attack usually consists of several parts, namely:
a. accrued pension rights;
b. annuity payment(s);
c. substantial interest;
d. revisionary interest.
If you only commute an annuity payment, only that part of the protective assessment, plus the revisionary interest, can also be cashed in. This payment falls under the normal bracket rate.
The Netherlands is only authorized to tax if the expenditure for an annuity payment was made in the period 01-01-1992 to 01-01-2001 or in the period after 15 July 2009 (Hoge Raad, 14 July 2017; ECLI:NL:HR: 2017:1324).
In addition, the annuity payment must be fiscally facilitated, ie the deposit or the periodic premium paid has been deducted from the income to be taxed. This is often not the case, if at all, because of too little so-called 'free annual space'.
It is often worth looking at this. Incidentally, you can also request a so-called 'balance statement' from the Tax Authorities (since 2001), on the basis of which you can see what you have deducted from your taxable income. And if you still know or can check with the insurer what you have paid in deposit and premium, then you are well on your way. But that then applies to the period after 15 July 2009. After all, the period from 01-01-2001 to 16 July 2009 may not be included in the levy.
The following concerns the holder of a substantial interest. On September 15, 2015 at 15:15 pm (!) an amendment came into effect whereby the protective assessment for this component will no longer be waived after 10 years upon emigration. This is called the 'emigration leak'. This measure was part of the 2016 Tax Plan, which has yet to be adopted. The question is whether this measure will reach the finish line in legal proceedings. However, no case law is available so far.
So even after 30 years of living in Thailand you can still have to deal with a settlement from the tax authorities. And be happy with that. Even if you have lived in Thailand for 30 years, the Tax and Customs Administration will always think of you.
In order not to have a gap of 5 years old age pension, it is better to buy a single-premium policy for that amount
the 2% that you purchase per year are expensive for what you get compared to the single premium policy.
That depends entirely on the level of the applicable premium income.
I would like to get in touch with Mr. de Haan, but I cannot find any contact details.
Can you contact me?
rinusd(at sign)gmail.com
In these example calculations it is assumed that the person enters his income for 100% Thailsnd. In my case, however, that is not true, because part of my early retirement income (I am 65 years old) remains in the Netherlands. This because of a Dutch credit card (ING) and some other payments in NL (including Staatsloterij). So I pay tax in Thailand on less money than my total NL income !!! My total income in NL was also lower at first, ie about € 1.300 per month and that is now about € 2.000 per month. As a result, I have never paid more than 10.000 THB tax per year in Thailand and in the coming year that will not be (much) more thanks to the extra 190.000 THB deduction.
Hey everyone
Anyone who knows and wants to share the comparison with Belgium?
thanks in advance
François
It's not easy to do, Francois.
You write about “Belgium”. But the Belgian tax system is rather fragmented. For example, what region do you live in?
I have also tried to calculate this for Belgium, but without coming into conflict with the fragmented Belgian tax system, you have at least earned an honorary doctorate from the University of Leuven and the Nobel Peace Prize.
Dear Francis,
Making such a comparison for Belgium is totally pointless and impossible as the acquired income of a Belgian is always taxed at source in Belgium. There is no agreement between Belgium and Thailand comparable to that of the Netherlands.
In the examples given, the comparisons will undoubtedly be correct, but the same income is assumed. However, this does not apply to me, and perhaps to some others as well, because I do not transfer my entire Dutch income to Thailand !!! In Thailand, only the transferred part is taxed, while in the Netherlands the entire income would be taxed.
My income is also lower than the example, last year it was only about € 1.300 per month. This year my income is quite strict to about € 2.000 per month. However, I am also 65 years old this year, so I can deduct the 190.000 THB extra in Thailand. I would also like to mention that I have never paid more than 10.000 THB tax in Thailand, partly because of my lower “transfer income”.
Now I don't understand it at all.
Have AOW for a single person and 2 pensions from the Netherlands.
Savings in banks in the Netherlands and Thailand where the interest in both countries is nil to 0,0.
I have been a tax resident in Thailand for many years, and have my tax completed every year by an experienced and good English-speaking Thai lady who has worked for years at the provincial tax office.
Of course after submitting all annual statements of income banks etc etc, from both countries
And I even get some money back from the Thai tax authorities every year.
And as far as I can tell, it works by the rules.
Jan Beute.
Jan Beute, the good English-speaking Thai tax officer also applies the reduction provision ex Article 23, paragraph 6, of the Treaty for the avoidance of double taxation concluded between the Netherlands and Thailand with regard to your state pension. In other words: does it take into account the payroll tax already withheld in the Netherlands when determining the Personal Income Tax due?
The wage tax withheld by the Netherlands or (if that is lower) the part about your AOW benefit included in the PIT, will then be deducted as 'withholding tax' at question 15 of form PND91. If not, you pay too much tax in Thailand.
It is not uncommon for things to go completely wrong in Thailand due to the lack of treaty knowledge.
Yes Lammert, she does take that into account.
Already paid tax in the Netherlands, my AOW and SVB.
And as I said I get a tax refund every year, the amount is not that big.
During the inspection and the first times I had to be personally present by an older Thai lady at the tax headquarters for Northern Thailand in Chiangmai, I once saw that they check all countries that have a tax treaty for money in their system.
After approval, everything is neatly sent by post to my home address, including the RO 21 and 22.
A few months later a letter follows with a kind of bank check for the Krungthaibank, but this can also be done via PayPal.
But every year it is a pile of papers with copies of bank statements from Thailand and the Netherlands about my income from pensions, interest accrued - Passport with visa - house or residence registration also my spouse whether we are still married etc etc etc.
Jan Beute.
I would also like to get in touch with Lammert de Haan regarding upcoming emigration,
Do you have an email address where I can contact you?
Kind regards Raymond
Hi Raymond,
You can reach me via: [email protected]
General
1. First of all, I would like to thank Erik for his compliment, but also for answering some comments. That saves me time.
2. In the foreword I clearly indicate the reason for writing this article, namely the messages posted by Dutch people in Thailandblog about the high tax burden for income tax compared to that of the Personal Income Tax (PIT). In one message I even came across a difference of € 11.000!
3. These Dutch people were not talking about property tax (only payable if you are the owner of a home), sewerage fees (usually only the owner), dog tax, etc. but merely about income tax.
The local taxes of Thailand also play no role in this and I have therefore left them out of consideration.
Involving the property tax in a comparison is in most cases completely wrong because you then have to include the entire tax system, namely also the WOZ addition and the mortgage interest deduction.
4. Some writers point out that they do not bring in their entire income in Thailand (the remittance base provision) or calculate their income tax due in the Netherlands, assuming they live in Thailand. These are examples of comparing apples and oranges.
For a comparison of the tax burden resulting from the tax legislation of the Netherlands and Thailand, you must at least assume the same tax base (income to be taxed), assuming that you live in the Netherlands (income tax, minus the tax component of the tax credits). to the PIT when living in Thailand.
Regarding the remittance base, see what I write about it in my article.
Hi Lambert,
My retirement is only 5 years away. Could I have an email address for you. Perhaps I can use your advice in the future. I have some ideas for the future. I have less good experiences with the tax authorities abroad in Heerlen regarding information provision.
Greetings
Fred van lamoon
Ayutthaya
Hi Fred,
You can always reach me at: [email protected]
Lammert,
Thank you! Your comparisons are an eye opener for me. It makes short shrift of the notions that you always have to pay much more tax in the Netherlands than in Thailand. I too have always thought this.
Dear Lambert,
Thank you for this explanation! My girlfriend and I also want to live in Thailand in a few years, so I always read these kinds of messages with interest. As a layman, I always thought that the tax burden in Thailand was much more favorable compared to the Netherlands. However, there are a number of points that raise questions for me.
Is it true that the example outlined only concerns someone who is still registered in the Netherlands? Because a tax credit of € 1.264 is applied, but people who have completely deregistered are no longer entitled to that, I thought. If that is indeed the case, then the person from your example would suddenly be cheaper in Thailand with complete deregistration. Is my assumption correct?
In addition, in the same example with early retirement, I see the first tax brackets up to an income of € 35.942 with a reduced rate. I always thought that the reduced tax rate only starts at the state pension age, and not so much at (early) retirement. Is this also correct? In that respect too, this person would be more advantageous in Thailand.
I ask mainly because these two points apply to me: early retirement and a full deregistration.
Never mind… I only now see that I have misinterpreted the explanation, sorry! It is of course a comparison between living in the Netherlands and living in Thailand. I first read it as a comparison between the tax burden of both countries, in both cases also residing in Thailand.
But I would like to say that the total tax burden in Thailand is generally much lower than in the Netherlands.
And then I am not only talking about income tax, which used to be wealth tax, but also about real estate - roads - water board - dog tax - garbage collection - sewer - transfer tax when purchasing a home, even when you die, the tax authorities also want to still get a fair share of the inheritance and many more national and municipal taxes that you can think of.
In the Netherlands, as an ordinary man, you only work for the tax authorities for most of the time.
And like everywhere in most countries of the world, the Netherlands and Thailand also pay the top incomes almost nothing, just look at Jeff Bezos as an example.
I am therefore still glad that I closed the door behind me in the low countries 16 years ago.
And being able to follow the news daily in the low countries makes me more and more happy, Thailand is also far from paradise, but the Netherlands I sometimes wonder whether we, as old hardworking residents of yesteryear, are still welcome there.
I also wanted to say this.
Jan Beute.