Income tax in Netherlands and Canada

Netherlands. In the Netherlands are the income taxes the tax levied on the financial income of persons, corporations, or other legal entities. In the Netherlands is the income taxation progressive. People with more disposable income pay a higher percentage of that income in tax than do those with less income. For income tax purposes 3 types of taxable income are distinguished. These income types have been classified into 3 so-called boxes:

Ø income from employment and home ownership

Ø income form a substantial interest

Ø income from savings and investments

The fiscal year is the calendar year. No later than March the citizens have to report their income of the previous year. In the Netherlands is the tax of total taxes in 40.4 % of GDP and by income taxes are the tax rates the highest.

Taxation of wage income tax in the Netherlands (Average personal income tax and social security contribution rates on gross labor income)

In the Netherlands is a progressive tax on wages, profits, social security benefits and pensions. Individuals living in the Netherlands and individuals, who do not live in the Netherlands, but who receive income from the Netherlands are liable for income tax. Residents are taxed on their entire income, regardless of the place of origin. Non-resident are only taxed on income directly connected wit the territory of the Netherlands. The system integrates tax with fees paid for the basic old-age pension system AOW, the pension system for partners of deceased people AnW, and the national insurance system for special medical care AWBZ. Below the term "tax" is used for the total.

Taxable income:

Income tax is levied on three categories (boxes) of income:

Box 1: includes employment income, business profits and income from home ownership

Box 2: includes income from a substantial shareholding taxed at 25%

Box 3: includes income from savings and investments taxed at 30%

Certain deductions are permissible from Box 1 income for 2012 including:

-costs for commuting by public transport

-alimony payments

-extraordinary medical expenses

-support for direct relatives

-life course scheme contributions

-other tax credits for children, single parents and senior citizens are also available

If certain conditions are met, a foreign employee working in the Netherlands may be granted the so-called 30% ruling. Under this ruling a tax free reimbursement amounting to 30% of the income from active employment can be paid to the employee.

Income tax returns have to be filed each year with the tax administration by April 1 of the year following the relevant tax year.

Tax rate

The Netherlands has partly a progressive tax rate. For a while, the highest income bracket in the Netherlands was 72 %, but now this is 52 %. The brackets are 2.45 %, 10.70 %, 42 % and 52 %. The first two brackets also contain the Social Security payments, making it effectively higher (premium national insurance is 31.15 %), also it is: 33.6 %, 41.85 %, 42 % and 52 %. The tax rates in the Netherlands are:

For taxpayers aged 65 or older (to be referred to as 65 and over) reduced rates apply for the first two brackets: 15.75 % and 23.5 %, respectively. The discount of 17.9 % of the income in these brackets corresponds to the AOW contributions, which are not owed by the AOW beneficiaries.

Also I have to add new tax rates for 2012 year

Tax rates for Box 1 income for 2012:

33.45% on income up to EUR 18’945

41.95% from EUR 18’945 up to EUR 33’863

42.00% from EUR 33’863 up to EUR 56’491

52.00% on income over EUR 56’491

The personal allowance is an addition of various types of expenditure. The personal tax allowances reduce income before calculating the tax due. A personal allowance is involved if one or more of the following items apply:

• alimony paid and other expenditure on maintenance

• losses on loans to new businesses

• 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

• donations

• expenditure on listed buildings situated in the Netherlands

Income from a substantial business interest includes: dividends and capital gains. There is a flat tax of 25 % (in 2007 was 22 %) on income from a substantial business interest, usually meaning a shareholding of at least 5 % in a private limited company.

The tax rate for income from savings and investments is 30 %. Expects with the 30 % ruling can opt to be exempted from taxation on savings and most of the investments. Amount 20 014 EUR (higher for 65 years and over with a low income) of the value of the assets is exempted.

Canada levies personal income tax on the worldwide income of individuals resident in Canada and on certain types of Canadian-source income earned by non-resident individuals.

Quoted from the Income Tax Act R.S.C. 1985: "An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year".

The amount of income tax that an individual must pay is based on the amount of their taxable income (income earned less allowed expenses) for the tax year. Personal income tax may be collected through various means:

1. deduction at source - where income tax is deducted directly from an individual's pay and sent to the CRA;

2. installment payments - where an individual must pay his or her estimated taxes during the year instead of waiting to settle up at the end of the year;

3. payment on filing - payments made with the income tax return;

4. arrears payments - payments made after the return is filed;

An individual taxpayer must report his or her total income for the year. Certain deductions are allowed in determining "net income", such as deductions for contributions to Registered Retirement Savings Plans, union and professional dues, child care expenses, and business investment losses. Net income is used for determining several income-tested social benefits provided by the federal and provincial/territorial governments. Further deductions are allowed in determining "taxable income", such as capital losses, half of capital gains included in income, and a special deduction for residents of northern Canada. Deductions permit certain amounts to be excluded from taxation altogether.

Provinces and territories that have entered into tax collection agreements with the federal government for collection of personal income taxes ("agreeing provinces", i.e., all provinces and territories except Quebec) must use the federal definition of "taxable income" as the basis for their taxation. This means that they are not allowed to provide or ignore federal deductions in calculating the income on which provincial tax is based.

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