Dutch Wealth Tax – How Bad is It Really?

The Dutch tax system is based on three types of income. The first is income from labour, the second is income from owning a company, the third is income from wealth. A lot has been written on the Dutch wealth tax, but how bad is it really?

Wealth Tax Problems

A lot has been written by fellow personal finance bloggers about the Dutch wealth tax. It would make The Netherlands impossible to live in if you’re aiming for financial independence and early retirement.

I don’t think this is actually the case. In this post I will show you exactly how our wealth tax system works and then compare it to taxes on capital gains and income.

How the Wealth Tax Works

Officially, this system doesn’t tax your wealth. However, it assumes you make a certain return on your wealth every year, and then taxes that return.

If the system wasn’t made complex it wouldn’t be a Dutch tax system. I will try to dumb it down for you guys. In short, your total wealth excluding your primary residence counts towards this tax. You must add all financial assets such as bank accounts, investments, and such, but for example not cars. From these assets, you may deduct liabilities such as personal loans (but not your primary mortgage).

Then there are four tiers on which the wealth tax is calculated. Note that these numbers are the 2019 numbers.

TierUpper LimitTheoretical ReturnTax as % of Wealth
030,360-- (first ˜30K is free of tax)
3> 1,020,0965.600%1.68%

Note that couples filing jointly can benefit from this by doubling the thresholds.

Also note that the tax percentages are the taxes within the tier. Bumping 1 euro over a tier doesn’t mean your entire wealth it taxed according to the new percentage.

Let’s have a look at how a few scenarios would play out, and how much taxes you actually pay within this system.

Some Examples

Person A has 50k in a savings account yielding 0.3% per year. His taxable wealth is 50,000 – 30,360 or 19,640. He pays 0.58% of this, or 114 euros. His returns are a measly 150 euros. Person A really should start investing…

Person B also has 50k, but invested 40k of that in a low cost index fund. On average, he makes 6% per year (savings and investments combined). His returns are 3,000 euros of which he pays 114 euros in taxes. Now that’s more like it! He pays only 3.8% of his investment returns in wealth tax.

Couple C, have a total wealth of 150k invested in stocks yielding 7%. As a couple owning 150k, you are still in the first tier. They can deduct 60,720 from their wealth and pay 0.58% over the remaining 89,280. Their return is 10,500 and their total tax bill is 518 euros or 4.9%.

Couple D is almost retired early, they are FIRE people and have saved up a cool 700k. It is invested across stocks, bonds, real estate and crowdfunding. They earn on average 5% since they invest less aggressively. Their returns are 35,000 per year. The tax bill is 0.58% of their wealth between 60,640 and 204,020 and 1.34% of the remaining 500k. The total taxes are 7,477 euros or 21.4% of their returns.

Person E is single, has a very high income, and has 2 million euros spread across cash, stocks, and real estate. He makes an average of 4% on his money because he’s not that efficient in investing it. His returns are a cool 80k per year and his taxes amount to 29,180 or 36.4% of his returns.

Capital Gains Tax vs Wealth Tax

Now when we compare the wealth tax with the capital gains tax system there are some differences.

In years when the stock markets are performing well, you pay more taxes each year in either system. In years with a flat or declining stock market you pay no capital gains tax, however you keep paying the wealth tax.

Depending on the tax system, the capital gains tax might be more efficient. Because if you only pay the capital gains tax upon selling your investments, like you would in the USA, then you can postpone paying taxes for decades! In that case the Dutch wealth tax is definitely not a great system.

But if you were to pay capital gains every year on your actual investment returns, I’d say either system is fine.

I’d also like to note that we do have dividend taxes in The Netherlands, however we can deduct those from the wealth tax we have to pay. So there’s no double taxation there.

Income Tax vs Wealth Tax

If we compare income taxes against wealth taxes we see that our wealth tax is way cheaper. Depending on your income, we could tax you as much as 52% of it.

As you see, even a single person making 80,000 per year from his inefficient investments would only pay around 29,000 in taxes. If the same person would earn a gross 80k salary, he would end up paying slightly over 31,000 in taxes.

If the person was more efficient in his investments, and make 6% instead of 4% he would earn 120k on his portfolio, still paying only 29k in taxes. A 120k salary in The Netherlands would incur a tax bill of 52k euros.


The Dutch wealth tax really isn’t that bad after all. Yes, it could be better, but it surely is possible to FIRE in The Netherlands.

Effectively, we don’t pay a dividend tax since we can deduct it from the wealth tax, and if you would earn this much money in gross salary then you will end up giving way more to the government.

I’m all about generating a large investment portfolio spitting out large returns. Although I am concerned about our government’s ability to tax anything they like, it’s not impossible to FIRE in The Netherlands. Our wealth tax system is just a little different than what other countries do.

27 thoughts on “Dutch Wealth Tax – How Bad is It Really?”

  1. Interesting perspective in your post! Yes I agree, the circumstances are not so bad in the Netherlands. We pay a decent amount of taxes when we work, but when will enjoy our early retirement I think paying taxes will feel a lot different!


    • Well, paying taxes will still feel like a burden I guess. The only good part is that when you’re generating large enough returns, the effective tax rate will be very manageable. However, if your portfolio isn’t optimised, you’re in for some nasty surprises.

  2. Goede post wederom!
    Enige puntje van kritiek is waarom alles in het Engels wanneer dit een artikel is wat enkel interessant is voor een Nederlander? De Nederlandse belasting termen vertalen naar het Engels geeft alleen maar verwarring m.i.
    succes met het blog blijf het zeker volgen!

    Enne het beste wealthtax systeem is er 1 waarbij de overheid de handjes in eigen zak houdt ipv te graaien bij burgers die al belasting over dat geld hebben betaald want dat wordt vaak vergeten.

    • Ben het met je eens dat het beste systeem is waar we geen belasting betalen. Het enige probleem daarvan is dat we dan een hoop andere dingen niet zouden kunnen doen. Ik identificeer mezelf wellicht een beetje als een terughoudende Libertariër. Ik ben tegen ons complexe stelsel van uitzondering op uitzondering, niet persé tegen belasting zelf.

      Ik schrijf in het Engels omdat ik dan een breder publiek kan aantrekken. Deze post lijkt mij daarvoor uitermate geschikt. Naast veel Nederlanders die prima Engels kunnen lezen is dit topic een flink struikelblok voor expats die hier komen wonen. Deze post toont aan dat het allemaal wel meevalt en dat je hier prima kunt wonen en aan FIRE kan werken.

  3. Great post, I knew you guys had a wealth tax using a theoretical return but I didn’t know the details like how you are able to deduct the withholding tax on dividends. That to me is a major one. This makes dividend-paying companies something worthwhile to look at. It’s also not that complex. Unlike Belgium where you can have a multitude of taxes and exemptions, and not to forget the ridiculously vague term “a good family man”.

    • It doesn’t make dividend companies more or less interesting. For us, there’s no difference between having capital gains or dividends (and they are mutually exclusive!). For now I prefer capital gains, they make the situation easier to manage. Maybe in the future I will weigh some of my portfolio more towards income stocks, but for now, nope. I go for diversity, which is impossible when picking dividend stocks.

  4. So theoretically, if you have dividends withheld on US stocks at 15%, you could deduct the entire tax paid against the wealth tax and end up paying zero?

    • With US stocks I’m not entirely sure. I have never looked into it that much, but I think there’s some loss of dividends you can’t deduct. I strongly advise you to look into it though, my knowledge on the NL-US tax treaty is very limited.

  5. A very nice post!
    Do you personally have investments which payout dividends? I have a question regarding the Dividend taxes impact on the wealth tax.

    Let’s say for example that person A has a total wealth of 100k, which means he will pay 404 euros on wealth tax. If through the year that person generates a total dividends of 5k, in which he paid 15% tax on. (750 euros)
    Does this mean person A does not have to pay any wealth tax?

    • Hi Johan, thanks for stopping by.
      I cannot comment on specific cases, since I’m not a tax lawyer. Maybe not the answer you’re looking for, but I am careful putting out advice like this.
      But in general, I do assume that you’re right. You can subtract any paid dividend withholding tax from your wealth tax if I remember it correctly. The result of this is that in The Netherlands it doesn’t matter whether you’re paying dividend taxes or not (assuming you’re paying the wealth tax).
      I do have investments that pay dividends. The index tracker VWRL pays quarterly dividends.

  6. Thanks for the post. It seems that in the Netherlands it is pretty similar than in Finland.

    We don’t have a wealth tax but we do have pretty harsh tax for capital gains (dividends, rents & capital gains from investments) which is 30% or 34% for over 30k capital gains.

    So yeah, Finland does not have good tax system for FIRE people either 🙂

    • Well, I think most countries tax wealth or the income of wealth in some way. The pros of a capital gains tax are that you are only taxed when times are good. When you make a loss there’s no tax. With a wealth tax system you are taxed whether you make a profit or not.
      Thanks for stopping by!

  7. I think the tax system in NL is very cruel and unfair. I am paying half of my salary to the government every month, yet I had to give aways 51,75% of my hard-earned bonus. Now, I got a letter from the tax authorities asking me to pay extra on my savings because government thinks I generated 4% capital gain even if I did not and they know how low the interest rates are. Many expats around me immigrated to US and Switzerlands to get rid of this rip off. The system here makes you feel like the slave of the state.

    • Well, to be fair, we do pay a lot of tax, but our social system is quite well organised. Compare that to the US (think education and healthcare) we’re quite well off.

  8. Hello, just for clarification if I have a saving account of 32k and they are untouched for more than a year, then I have to pay tax on them ?

    • I don’t know, that depends on your situation. Whether you “touch” your savings or not doesn’t matter. Everything in your wealth above the threshold is taxed. The wealth you have on Jan 1st is what matters.

  9. Thank you for posting this in English, really helpful for us “internationals” who move here and are trying to figure out the system. I agree it’s really not that bad! And I come from the US… and to tell you the truth I feel like we Americans pay a lot in taxes for what we get in return (which is… NOT a lot).

  10. For anyone with significant savings/investments (exluding primary dwelling), the Dutch system is not just bad, it’s absolutely terrible.

    Your examples are really out of touch with reality since 4% or more interest on investments is a fantasy these days. The stock markets are extremely volatile and a major depression is expected. “Safe” low-risk investments like government bonds and CDs return less than 2% a year. Yet the Dutch government assumes 4% or more for people who have managed to save diligently all their lives? This is preposterous. Given that interest rates and investment opportunities in Europe are generally a lot worse than in the US, I don’t understand how Dutch citizens can accept this rotten system. Like someone else said, it’s basically legal serfdom that chains you to the state.

    Posts like yours do not help since rather than point out all the weaknesses of the current system, attempt to justify it with arguments that no longer hold water.

    • You are correct. The Netherlands punishes people who save and particularly older people like me who want to invest conservatively because they can’t risk their pension savings. The amount of money you can get on savings versus the ridiculous 4% that is assumed you get should not be allowed in law. They don’t call it wealth tax but a tax on assumed returns on investment. I assume not many Dutch people have large amounts of savings and therefore they want to punish the “privileged” people who have saved for their retirement. Not everyone gets a decent state of private pension and in fact the Dutch state pension is a joke.

      • I agree wholeheartedly.

        While I like the Dutch as a people and a country and the efficiency of things on the administrative side, I absolutely HATE the financial side of things.

        If you are into making money (you are frugal, ambitious and SAVE your earnings), investing into stocks (even passively) or real estate (residential, commercial, agricultural/industrial), building WEALTH (even generational) then LEAVE NL for your own good.

        To own one property (and nothing else) where you live is fine but if you think about buying multiple properties and renting them out in NL, think twice.

        It’s no wonder that people are hiding their hard-earned SAVINGS elsewhere.

  11. If one have €50 million in savings in my country at 0.30% interest and the bank withhold 15% tax on the interest earned yearly, as these days banks pay rubbish interest ,..and if i move to NL and buy a business and house worth €10 million what will i be paying on all wealth tax? If to complicated i rather go to isle of white, There is no capital gains tax, there is no inheritance tax, there is no corporation tax, there is no stamp duty, and income tax comes in very low indeed: the top rate is 20%.

    • If you have that much money I would recommend talking to a tax lawyer definitely. In The Netherlands you would be paying a load of taxes on that wealth, regardless of the small interest received.
      Thanks for stopping by!

  12. My wife and I are planning to FIRE at some point in our lives. I am Canadian and she is Dutch so we’re comparing both systems.

    The advantages of the Dutch system are:
    1. Your tax does not increase when you make higher returns on your investment.

    The advantages of the Canadian system are:

    1. You do not have to pay any tax on your cash cushion (by cash cushion I mean 2 to 3 years expenses that should be kept aside for market crashes such as the one caused by the pandemic)

    2. You can carry losses forward for three years so if one year you have negative returns, you get a tax deduction on subsequent years.

    3. You do not pay any taxes on securities you do not sell. This is important because we plan to reinvest 2% of our wealth each year to fight inflation.

    Overall, I think FIRE is substantially harder in the Netherlands as compared to Canada.

    • Interesting case! If it were me, I would sit with a tax lawyer experienced in Canadian-Dutch moving etc. This can become complicated quite quickly, but as you mentioned, it seems that things are a little easier on the other side of the water ;-)