U.S. Tax Filing Requirements for Americans in the Netherlands
As an American living in the Netherlands, you’re subject to U.S. income taxation on your worldwide income. You’re therefore generally required to file a U.S. income tax return. In addition, as a resident of the Netherlands, you’re generally subject to Dutch income taxation.
How can I avoid double taxation?
On your U.S. tax return, you can claim a credit for the income tax paid to the Netherlands. Generally, Dutch tax rates are high in comparison to U.S. tax rates. Therefore, the amount you can claim as a credit on your U.S. may be sufficient to fully offset your U.S. income tax liability.
Alternatively, you may be able to claim the Foreign Earned Income Exclusion. If you qualify, you can exclude up to $112,000 of your Dutch wages and other foreign earned income. The exclusion amount is adjusted annually for inflation. Unfortunately, only earned income can be excluded. In other words, unemployment benefits, pension income and other unearned income cannot be excluded.
What other forms am I required to file with the IRS?
When living in the Netherlands, you may be required to file, as part of your U.S. tax return, certain forms that a U.S. taxpayer living in the U.S. may not need to file. Here are some of the most common tax forms filed by Americans living abroad.
You’re required to file FinCEN Form 114 (“FBAR”) if you have one or more foreign (i.e. Dutch) financial accounts with an aggregate value that exceeds $10,000 at any time during the year. There’s no tax on wealth in the U.S., but the IRS wants to know about your foreign financial assets. If the value if your foreign financial assets exceeds a certain threshold (generally $200k), you’re required to file Form 8938 as part of your tax return.
If you own a business in the Netherlands, such as a limited liability company (BV), corporation (NV) or partnership (VOF), you may be required to file Form 5471 or Form 8865. Your Dutch business itself will generally not be subject to U.S. income taxation. However, you are required to provide the IRS with detailed information.
What’s the filing deadline for my U.S. tax return?
As a U.S. citizen living abroad, you receive an automatic 2-month extension of time to file your U.S. federal income tax return and time to pay your tax. The deadline to file your 2022 tax return is June 16, 2023. Interest will still be charged, however, on payments made after the regular due date.
If you’re a U.S. citizen in the Netherlands, contact us with any questions you have about your U.S. tax filing requirements. We specialize in the preparation of U.S. tax returns for Americans in the Netherlands. We have an office in Rotterdam.