Trading for a living & taxes in the Netherlands

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Old Apr 12, 2010, 11:51pm   #16
DHB
 
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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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Old Apr 13, 2010, 11:29am   #17
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Re: Trading for a living & taxes in the Netherlands

DHB, thanks for your research (and kind publication here without asking for an enormous fee...) . Its in line with what I was told from dutch taxation office.

Just for clarification: Are the gains taxed or the capital (substance)? My understanding was, I had to pay 1.2% of my used capital - if I make profits or even if I make losses - just like a property tax.

Kind regards and thanks

Hittfeld
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Old Apr 13, 2010, 12:39pm   #18
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Re: Trading for a living & taxes in the Netherlands

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Originally Posted by Hittfeld View Post
DHB, thanks for your research (and kind publication here without asking for an enormous fee...) . Its in line with what I was told from dutch taxation office.

Just for clarification: Are the gains taxed or the capital (substance)? My understanding was, I had to pay 1.2% of my used capital - if I make profits or even if I make losses - just like a property tax.

Kind regards and thanks

Hittfeld
Hi Hittfeld,

Bear in mind that the following information is coming from other people who claim to have experience with this matter, but that I haven't verified any of this yet myself with any official authority, but from what I understand, the following applies:

Your taxable assets in box III are calculated as follows:

(net asset value January 1st + net asset value December 31) / 2 * 4% * 30%

Net asset value = assets minus taxfree discount ("heffingsvrij vermogen") - debts not related to box I or box II.

From what I understand, only the asset values on 1/1 and 31/12 are relevant. Any withdrawals (e.g. for your cost of living etc.) in between are irrelevant for the calculation. Also, it appears that since it's all box III, you also don't have to pay any social security premiums ("premies volksverzekeringen"), but it also means you don't have any rights on welfare etc., which is fair imho.

Hope that clarifies things a little?

Personally, I still think it all sounds a little too good to be true, but the court ruling to me seems very convincing that we may have a loophole here...

Anyway, what did you learn from the tax office you said you consulted? Did you go to the belastingdienst directly, or did you consult a fiscal advisor?

B.
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Old Apr 14, 2010, 6:27am   #19
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Re: Trading for a living & taxes in the Netherlands

DHB, thanks for the clarification. Actually this is compliant with my experience. I once was a dutch tax subject for a few years. So my information is from both: taxman (Belasti...) and internatonal advisors.

But to make everything stormproof, taxman and advisor gave me the hint, to have a "main occupation" of min 15 hrs p week for insurance purposes. To comply with this, I made arrangements with a firm in neighbouring Germany. They employed me in (a low paid - low insurance - no tax) position ( the firm deducted y cost from tax - I reimbursed the pay and costs to the owner privately). So taxwise in Holland I was treated as employed (but taxed in Germany), with a decent side job (trading) in NL - taxed to the favourable dutch BoxIII rate.

Regards
Hittfeld
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Old Apr 14, 2010, 8:38am   #20
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Re: Trading for a living & taxes in the Netherlands

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Originally Posted by Hittfeld View Post
DHB, thanks for the clarification. Actually this is compliant with my experience. I once was a dutch tax subject for a few years. So my information is from both: taxman (Belasti...) and internatonal advisors.

But to make everything stormproof, taxman and advisor gave me the hint, to have a "main occupation" of min 15 hrs p week for insurance purposes. To comply with this, I made arrangements with a firm in neighbouring Germany. They employed me in (a low paid - low insurance - no tax) position ( the firm deducted y cost from tax - I reimbursed the pay and costs to the owner privately). So taxwise in Holland I was treated as employed (but taxed in Germany), with a decent side job (trading) in NL - taxed to the favourable dutch BoxIII rate.

Regards
Hittfeld
Oh, if you have an ordinary job (however small) besides your trading, even though the latter is your main source of income, your trading income definitely belongs in box III. But unless you're able to create the type of arrangement you had going on back then, you're still a (part-time) wage slave and not 100% free to do what you want, when you want, which is after all one of the biggest perks of being able to trade for a living.

So basically one more question remains: do you still need that (part-time) job or will the tax man leave you alone even if you don't have one. With the obligatory health insurance nowadays in Holland, I wonder if you still need a job for insurance reasons.

How long has it been since you were a dutch tax subject, Hittfeld? I'm asking, because maybe the health care system in those days differed from how things are today? Did you necessarily have to have a job to be health insured in those days?

Regards,
DHB
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Old Apr 15, 2010, 3:35am   #21
 
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Re: Trading for a living & taxes in the Netherlands

DHB,

That is good news. I will read the court case ( I can read dutch) and see what it is about. I do trade for a living and I am profitable since I started trading 3 years ago. I don't know if I would move back to the Netherlands. I have been away for 13 years and I am no longer liable for the Dutch Inheritance TAX, it takes 10 years of being away from Holland to be not liable.

I will be checking Andorra out soon to find out if it is a good place to be in.
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Old Apr 15, 2010, 1:04pm   #22
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Re: Trading for a living & taxes in the Netherlands

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DHB,

That is good news. I will read the court case ( I can read dutch) and see what it is about. I do trade for a living and I am profitable since I started trading 3 years ago. I don't know if I would move back to the Netherlands. I have been away for 13 years and I am no longer liable for the Dutch Inheritance TAX, it takes 10 years of being away from Holland to be not liable.

I will be checking Andorra out soon to find out if it is a good place to be in.
To me, it sounds like there's no need for you to move back to Holland, unless you're homesick or something, but that would have to be a case of extremely late onset homesickness, wouldn't it?

There are so many places that are more appealing than the Netherlands to live in. I wouldn't miss the 10 out of 12 months of grey, windy, rainy weather for a second once I would have moved on to greener pastures.

Keep us informed about your findings about Andorra. The combination of sun, mountains and potential fiscal friendliness sounds like a good one!
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Old Apr 15, 2010, 1:14pm   #23
 
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Re: Trading for a living & taxes in the Netherlands

It always comes down to the kids. Holland scored the number one position in the UN happy kids index. Where Malta where I am based now ranks at the bottom for European countries.

Malta has got good weather and is also very tax friendly for foreigners. However I find island life a bit difficult. Especially at the weekends when there is no trading. Soon you will have seen it all. So yes it is time to check out some other destinations. I will be checking out Andorra in May. I like the fact of 2 seasons. A warm summer with a cold winter with skiing possibilities. Negatives are the fact that I will need to learn a new language Catalan.

Groetjes

Soldintime
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Old Feb 10, 2012, 3:26pm   #24
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Re: Trading for a living & taxes in the Netherlands

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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.
Self-tax-Advisors?

Where have you read this law in Malta? this is a PURE illusion of do-it-your-self reading of laws.

Malta residents are taxed always on capital gains, at rate of 35%! (wow the highest in Europe), even if they apply for non domiciled scheme that is really avaible. In each case where a trader produce income as you do doing trading from Malta, you will be taxable. The unique way to be not taxed is that as happen in UK for example (and even here I have raed wrong interpretation of the law) you can have investiments abroad and are managed buy advisors, funds and so on, that do not belong to you and are professionally doing this. So for example an hedge fund could be ok or a managed account. Unfortunately this is not the case of over 99% of traders, self traders, looking to find a nice place where to pay 0% capital gain tax.

In Malta everybody pay capital gan taxes as self trader and for that there are very few traders that are residents elsewhere than Malta.

Be aware!
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Old Feb 10, 2012, 3:31pm   #25
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Re: Trading for a living & taxes in the Netherlands

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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
I read the tax system for capital gains in Holland.

They state 1,2% on the net capitals/investments used to realized a profit, so if you have an account of 100.000 EUR, you will pay around 1.200 eur tax.

Would be to nice... 1,2% on profits realized, assuming a 10% profit in the year this will be equal to a 0,12% only.

1,2% tax on Net assets is really good however I was just investigating in this and found other forums/posts with incorrect informations about other countries.
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Old Dec 15, 2012, 1:00am   #26
 
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Re: Trading for a living & taxes in the Netherlands

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Originally Posted by DHB View Post
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).

<SNIP/>
Wow, this is incredible information, thanks. I am going to try to get my trading profits taxed in Box 3; let's see.
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Old Dec 15, 2012, 10:55am   #27
 
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Re: Trading for a living & taxes in the Netherlands

I am Dutch and I had a read through it. Basically a professional options trader with 20 years+ experience started trading for himself and made losses of €300K+ over 2 years. And tried to use these losses to deduct his tax. The court ruled against it.

The reverse is that profits will also not be taxed. Bar the 1.2% CGT.
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Old Dec 15, 2012, 1:26pm   #28
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Re: Trading for a living & taxes in the Netherlands

Hi soldintime, left Malta for Andorra? How`s life there? Tax ca 12%???

Regards
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Old Dec 15, 2012, 2:43pm   #29
 
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Re: Trading for a living & taxes in the Netherlands

I left Malta 2 years ago for Andorra. Love it here and 0% tax. Trading and snowboarding, good schools for kids.
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Old Dec 15, 2012, 2:44pm   #30
 
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Re: Trading for a living & taxes in the Netherlands

Funny the flag on my profile is the Malta flag but when you hover over it it says Andorra.
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