Special tax rate

Bijzonder tarief? Thank you for the  “special tax rate” but why am I paying more tax for being special!?

Wage tax is a withholding on your income for the tax year we are in but which won’t be declared until the end of the tax year. Tax is withheld as you go along, and your income tax amount is based on all your income that year. But there are also deductible items that are applicable depending on your situation.

The filing deadline for income tax returns is May of the following year. This is an important and sensitive responsibility that you want to get right, and we know that sometimes an expert is needed. But don’t worry—contact us to get introduced to our tax specialist who lives and breathes this stuff.

To calculate the standard wage tax withholding on your gross salary, we use the schedules provided by the Dutch tax authority.

Bijzonder tarief?

But what is the bijzonder tarief? This special tax applies to one-time payments like the holiday allowance in May, the 13th month in December, a bonus in April, or overtime. The special tax percentage is set by the tax authority.

If you are willing to get into the details, here is an example of how it works.

Special tax rate/Bijzonder tarief

Let’s say your salary is between EUR 33.113,00 and EUR 33.994,00. The special wage tax percentage applicable on your employment is then 32.57%. So if you get a bonus of EUR 5.000,00 the wage tax you pay will be 32.57% of EUR 5.000,00  =  EUR 1.628,50.

These percentages can be high for you in some years, so if you have overpaid the tax authority in a year because of one-time payments, you can probably get a refund when you file a return the following year.

Overpayment can be caused by the mortgage interest deduction, medical expenses, or additional income because of another employer or a second job.

We don’t want to give the impression that we are calculating these amounts with pencils and calculators, one at a time. Fortunately for us, the payroll system has all that built in. We do manual checks to ensure quality and accuracy, though, so we are aware that mistakes can happen—sometimes a withholding amount is incorrect or the wrong percentage is applied to a special tax amount. This can result in the wrong (too low!) take-home pay amount.

So if you have any doubt, please feel free to contact us. We can’t have that.

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Karin Otten, Karin Otten