Trading for a living & taxes in the Netherlands

This is a discussion on Trading for a living & taxes in the Netherlands within the Home Trader forums, part of the Trading Career category; Originally Posted by Hittfeld (...) To my knowledge NL is a traders tax heaven. I used to play the following ...

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Old Jan 22, 2010, 3:01pm   #9
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Re: Trading for a living & taxes in the Netherlands

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(...)

To my knowledge NL is a traders tax heaven. I used to play the following game: A self created Day-Job ( 15 hrs per week ) for the taxation and social security.

(...)

As long as you can proof to have another job, there was no risk involved to be considered as a professinonal trading firm (which would be a different kind of taxation).
Hittfeld,

So basically what you're saying is that, as long as you've got some form of other income (albeit for the record, since your primary source of income would be your monthly trading profits), your trading income is seen as investing gains (beleggingswinsten) and as such, only taxed @ 1.2%?

Secondly, what exactly did you mean by a "self-created day-job"? Self-employed (eenmanszaak or something)? Or just some ordinary part-time job?

Regards,
Boy
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Old Jan 27, 2010, 3:18am   #10
 
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Re: Trading for a living & taxes in the Netherlands

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You ARE living in a tax haven!!!!! The trick is NOT to look for a tax heaven in general, but to look for a country where YOUR KIND OF ICOME GENERATION is taxfree. For example gains from sale of real estate property are (with certain restrictions) free from any tax in NL and GErmany, but taxed heavily in many countries (incl SWITZERLAND). Gains from betting are taxed (and due to social security) in Switzerland, but not in Germany or UK - in NL depending on the subject you are betting on! So is Switzerland a tax heaven? GErmany a tax hell? It depends.

To my knowledge NL is a traders tax heaven. I used to play the following game: A self created Day-Job ( 15 hrs per week ) for the taxation and social security. Savings accounts ( taxed als interest), broker accounts for monthly traded investment strategies ( 1.2% - additionally 15% on received dividends) broker accounts for trading (1.2%). The cash stream from the accounts are not subject to any taxation or ss. Everything to be declared in iots proper "box".

As long as you can proof to have another job, there was no risk involved to be considered as a professinonal trading firm (which would be a different kind of taxation).

Regards
Hittfeld

p.s. I `m going to leave CH within 2 years. Guess where!
I have been so long out of the Netherlands that I have forgotten that it is good for traders. I had a friend going to the Haags Juristen College for advice and their answer was a lot more complicated than what you described. It involved at least 2 offshore entities.

Hittfeld, Switzerland is one of the most beautiful countries in the world and a tax heaven for NON Swiss.

I have stayed in the UK for 10 years but they started changing the Non Domicile rules. The next conservative government might scrap it completely is my feeling.
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Old Jan 28, 2010, 12:40am   #11
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Re: Trading for a living & taxes in the Netherlands

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I have been so long out of the Netherlands that I have forgotten that it is good for traders. I had a friend going to the Haags Juristen College for advice and their answer was a lot more complicated than what you described. It involved at least 2 offshore entities.
That's interesting info, Soldintime. Thanks for sharing. Looking at their website it seems that the HJC is specialized in tax minimization constructions. Excellent.

Btw, the little flag in your profile says you're currently residing in Malta. I know a few senior airline pilots who have officially migrated to Malta due to its tax and ordinary climate. Is Malta any good for traders? How does it compare to other countries/territories, to your knowledge?

Last edited by DHB; Jan 28, 2010 at 12:42am. Reason: typo
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Old Jan 28, 2010, 3:02am   #12
 
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Re: Trading for a living & taxes in the Netherlands

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That's interesting info, Soldintime. Thanks for sharing. Looking at their website it seems that the HJC is specialized in tax minimization constructions. Excellent.

Btw, the little flag in your profile says you're currently residing in Malta. I know a few senior airline pilots who have officially migrated to Malta due to its tax and ordinary climate. Is Malta any good for traders? How does it compare to other countries/territories, to your knowledge?
Malta is brilliant for Traders. They have a non-domicile taxation which is excellent for foreigners moving there. They do not tax overseas income as long as that income is not remitted within the same tax year. So when the new tax year starts Income from previous year can be remitted free of tax to Malta.

Other benefits are low rent, I rent a 4 bedroom 5 bathroom house with 5 car garage and a 13 meter pool for €1000 a month. No council taxes. The only high tax is on buying a car. I have not paid a cent of tax. Childcare is a joke at €1 an hour. Beer is 1.10 and so is capuchino.

Of course you will be stripped of any benefits, pension and health. So you need to sort that out yourself.
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Old Jan 28, 2010, 3:14am   #13
 
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Re: Trading for a living & taxes in the Netherlands

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That's interesting info, Soldintime. Thanks for sharing. Looking at their website it seems that the HJC is specialized in tax minimization constructions. Excellent.

Btw, the little flag in your profile says you're currently residing in Malta. I know a few senior airline pilots who have officially migrated to Malta due to its tax and ordinary climate. Is Malta any good for traders? How does it compare to other countries/territories, to your knowledge?
Hier nog wat meer informatie.

Other good things in Malta are the absence of inheritance tax. If you move away from the Netherlands it will take you 10 years to fall outside the Dutch inheritance tax laws.

If it comes to settling with a family, the Maltese school system is bad. Also the UN happy kid index ranked Holland the number one place. Malta ranked on the bottom in the EU. These are things to consider.

You could move to the UK or Ireland and they both have a Non-Domicile rule as well but there you have to keep your income offshore. However you can always remit capital to live from. After 7 years in the UK as a NON dom you will have to pay for the privilege to use it. Which is why I have left the UK. I do not fancy the Irish weather so hence I am in Malta.

However when my kids come to school age I will have to look for an alternative destination. But that is me, my UK neighbour who runs an online accountancy with UK customers from Malta is happy and his kids go to school there.
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Old Feb 1, 2010, 11:20pm   #14
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Re: Trading for a living & taxes in the Netherlands

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Hier nog wat meer informatie.

Other good things in Malta are the absence of inheritance tax. If you move away from the Netherlands it will take you 10 years to fall outside the Dutch inheritance tax laws.

If it comes to settling with a family, the Maltese school system is bad. Also the UN happy kid index ranked Holland the number one place. Malta ranked on the bottom in the EU. These are things to consider.

You could move to the UK or Ireland and they both have a Non-Domicile rule as well but there you have to keep your income offshore. However you can always remit capital to live from. After 7 years in the UK as a NON dom you will have to pay for the privilege to use it. Which is why I have left the UK. I do not fancy the Irish weather so hence I am in Malta.

However when my kids come to school age I will have to look for an alternative destination. But that is me, my UK neighbour who runs an online accountancy with UK customers from Malta is happy and his kids go to school there.
That's excellent info. Again, thanks a lot for sharing. I'm a real tax newbie, and I still have a lot to learn about what is possible in terms of tax migration and/or tax burden reduction via business entities, so your input is very much appreciated.

I don't have any immediate migration plans, and although neither Ireland nor the UK would rank high on my list of ideal emigration destinations, what do these Non-Domicile rules you were referring to mean in a nutshell?
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Old Feb 1, 2010, 11:38pm   #15
 
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Re: Trading for a living & taxes in the Netherlands

Your domicile is where you were born. My domicile is in the Netherlands. Countries that have a non-dom rule mean that your domicile is not with the country that you are resident. There are only a few countries in the world that have favourite taxes for NON-DOM: UK, Ireland & Malta. The rule is mainly that income and capital gains that are generated outside the country is tax free as long as they are not remitted. Malta has a more favourable version that allows the income to be remitted in the next tax year free of tax.

There are other countries that allow all foreign earnings to be tax free where the rule applies to domiciled and non domiciled. Panama is such a country.
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Old Apr 12, 2010, 11:51pm   #16
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Re: Trading for a living & taxes in the Netherlands

DHB started this thread Well, I've been doing some more research into this matter, and it seems that traders might actually get away with only paying capital gains tax (box III) of 1.2% on trading profits.

On the website rechtspraak.nl, which is the website that publishes Dutch court decisions (which are only in Dutch unfortunately for those who don't speak the language. Don't know if google translate can be of any help with judicial jargon...), take a look at case AWB 07/2843 (search for the bold case number and you should be able to find it without any difficulty).

In short, this man, who has worked as an investment professional for years, and who should be considered to know a thing or two about financial products, traded in options privately, made a few (big) losses, and tried to deduct these losses from his taxable income, which in the Netherlands one can do, provided that the trading losses (or gains) are income in box I. One of the requirements to be eligible for that is that a profit from this trading activity was objectively and reasonably to be expected. And that's where the judge has ruled that despite this man's extensive experience in the financial world, which he claimed should give him an advantage over others (and therefore a profit from his trading activity should have been expected reasonably and objectively), still was not sufficient. Unless the man had insider knowledge, which he hadn't, this loss was considered part of normal portfolio management (i.e., box III, capital gains tax of 1.2%), because the judge ruled that the man had no information advantage over other experienced/professional traders, and therefore, a profit was not to be expected objectively and reasonably.

In summary, the judge considers trading an activity that people without insider knowledge should not be expected to profit from (they believe in the efficient markets theorem! ). And therefore, any gains are only taxed at 1.2% in box III, and any losses are not deductible from other sources of income. I should think that with this court ruling in hand, one could easily convince the tax man who thinks otherwise, that trading income should only be taxed at 1.2% as box III income. If not, then you'll be taxed significantly more, but, then again, you can also deduct your losses! And precisely for that reason (given the well known statistic that around 90+% of traders are net losers) I believe that the tax and judicial authorities will leave home traders who are able to live off of their profits alone.

Last edited by DHB; Apr 13, 2010 at 12:46pm. Reason: Forgot to make case no. bold
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