For many years, the possibility for a non-working or low-income fiscal partner to benefit from a general tax deduction was one of the most commonly used deductions to increase the Dutch tax refund. In Poland, this allowance was called a separation allowance and for many years it made such a family model, where the wife stayed at home, very profitable from a tax point of view. For some time now, however, the Dutch government has changed the concept, steadily reducing the relief for the spouse. How does it currently work to account for a non-working wife? Is it still profitable? Read more about this in the following post.
Settlement with a non-working wife Netherlands - what did it look like before?
The non-working wife allowance used to be extremely popular and very much used by our compatriots. By many people it was equated with compensation for working abroad, which is why it is called 'separation'. In reality, however, it has little to do with separation, as partners can just as well live together.
What made settling jointly with a non-working spouse so worthwhile was the possibility of taking advantage of a general tax allowance (algemene heffingskorting). If the fiscal partner had little or no income, this had the effect of significantly increasing the Dutch tax refund.
However, this kind of support for low earners living with a fiscal partner with no income has been abandoned in the Netherlands for some time. Presumably, this is intended to encourage such people to become active in the labour market and find employment. This can be inferred from the increase in other income-related tax credits , including the employee tax credit (Arbeidskorting) allowing a reduction in the tax to be paid.
Settlement for a non-working wife in the Netherlands - until when can you benefit?
In 2023, the general tax allowance will no longer be paid to the lowest earning partner if he or she was born after 1962. This is a consequence of the systematic phasing out of this allowance already started in 2009.
How much is the separation allowance in the Netherlands in 2022?
The maximum amount of the Dutch separation allowance has decreased with each passing year, and in 2022 it is now only €193. This is the maximum deduction that can be obtained for this, and the individual rate is calculated depending on the income of the fiscal partners and the advance payments made to the tax office in the Netherlands for work performed in the Netherlands.
Settling with a non-working spouse therefore significantly reduces the overall income, so that such marriages could count on the maximum deduction rate. As recently as 10 years ago, this deduction would have amounted to around €2,000 in such a case, which shows the huge change that has taken place over the years. Nowadays, the profitability of taking advantage of such a solution is therefore no longer so obvious and each case is worth analysing individually by making the necessary calculations. It may turn out that a small compensation will not be worth dealing with such a large amount of paperwork.
Tax settlement with a non-working wife - what conditions must be met?
The basic condition for settling with a fiscal partner is the 90% rule. This means that income earned outside the Netherlands must not exceed 10%.
This is easiest to demonstrate with examples, so we will present below hypothetical situations that are very likely. Firstly, the husband works and lives the whole year in the Netherlands, while the wife has no employment and lives in Poland. In this case, the entire joint income of the fiscal partners has been earned in the Netherlands, and therefore a joint settlement is possible. On the other hand, if the spouse who remains in Poland has employment and the amount of his/her earnings exceeds 10% of the joint income, a joint tax return will not be possible.
In the case of married couples living in the Netherlands, the case is easier, as all income is earned in the Netherlands, so it does not matter whether the wife works or not.
Thus, in order to prove the right to use the settlement with a fiscal partner, it will be necessary to present information to the tax office in the Netherlands about all income earned - also income earned outside the Netherlands, for example in Poland.
We must also remember that a BSN number is required in order to submit a tax return. If you are legally employed in the Netherlands, you will automatically receive a BSN, but what about a spouse who is not working? You have to apply to the Belastingdienst for a number by submitting a special application. It is advisable to think about this in advance, as this procedure can take up to six months.
Settlement with a fiscal partner - not only the wife
It is also worth knowing that the fiscal partner in the Netherlands does not have to be only the spouse. The Dutch regulations also provide for other possibilities of joint settlement, which are strictly defined. Your fiscal partner may also be the partner with whom you have a formalised partnership, the other person with whom you have a child, or the partner with whom you share a flat or house.
How do you account for your non-working spouse? Use the Aangifte app
As you can see, this is the last chance to benefit greatly from settling with a non-working spouse. What's more, you can apply for so-called separation payments from the Netherlands up to five years back, also if you haven't made use of this possibility so far, you still have the chance to recover a good portion of the money. Not sure how to do this? No problem, download our tax return application and we will help you file your Dutch tax return. Our software has all the necessary features to help you get a favourable refund, and if you have any problems you can use our advisors to help you. We invite you to make use of our services - Aangifte.
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