Buying a house in Holland 2

Transfer tax (overdrachtsbelasting). This is 6% of the purchase price of the property and is probably the only cost that is not negotiable!

Valuation. (taxatierapport) Standard is 0.2% (plus BTW) of the purchase price but may be negotiated down. This cost is tax deductible.

Presale agreement (koopovereenkomst ) – 0.3% (plus BTW) of the purchase price. Rarely negotiable.

Transfer contract – (akte van levering) – 0.3% (plus BTW) of the purchase price. We can arrange this for considerably less.

Mortgage Contract – (hypotheekakte) 0.15% (plus BTW) of the purchase price. This cost is tax deductible

Mortgage arranging cost – (afsluitprovisie) – 1% of the mortgage! (about 1.2% of the purchase price) This cost is tax deductible

Estate Agent Fee (makelaarscourtage) - 2% (plus BTW) of purchase price – may be negotiable but definitely ONLY payable if you have actually asked the estate agent to find a property for you.

Thus the buying costs are from 8.15% to 10.15% of the purchase price depending on whether you use an estate agent or not.

Nowadays it is possible – and advisable – to request the tax relief on your mortgage to be paid directly into your bank account by the tax office on a monthly basis. In the past you had to wait until the end of the tax year to claim the relief. It is part of the standard Strategies service to arrange this for you in the first year. Nowadays you automatically continue to receive the refund in subsequent years unless you cancel the request.

Tax relief is always granted at your marginal rate even within the 30% ruling.

In 2007 the tax bands are:

• The first €17,046 is taxable at 34.15%
• The next €13,585 is taxable at 41.45%
• The next €21,597 is taxable at 42%
• Everything above this is taxable at 52%.

However the above applies only to “taxable” earnings. Under the 30% rule your employer agrees a basic package of emoluments and adds 30% tax free to cover cost of living away from home. So if your total income is €53,000 the taxable part is €37,100 which means you are taxed at 42% not 52%. In other words, under the 30% ruling, you need to be earning over €.74,300 per annum for your marginal rate to be permanently 52%.

Additionally there are two tax discounts. The labour discount, which is accounted for in your salary and the general discount (2007 €1,990 for the year). If you are a non-working spouse you may claim this discount to be paid directly to you.

Also – if you own your own home (whether or not it is mortgaged) you are required to pay the rental value forfeit (eigenwoningforfeit). Effectively the (theoretic) rent you save is added to your income and taxed at your marginal rate. In short you pay a penalty because you are saving rent! This is tied to the so called WOZ value of your property.

Each year you receive a bill for property tax (onroerend goederenbelasting) from your gemeente. This shows the WOZ value of your property which is the basis of the tax payable. It is not related to the actual value and it varies considerably from gemeente to gemeente. It is, therefore impossible to compute this accurately but – as a general rule of thumb – we recommend reducing your “marginal” rate by 4% (i.e. 52% becomes 48% and 42% becomes 38%) mortgage interest tax relief. It is crude but at least you will not get a nasty shock when the tax bill finally arrives!

Peter Gibney is a consultant with Strategies based in Dordrecht. Strategies are a fully licensed insurance broker/financial advisor specialising in the expatriate market. Any questions arising from this series of articles or other none related matters may be directed to Peter on {phone} 078 844 0879 or {fax} 084 751 2944 or {e-mail}

This article has been submitted by Peter Gibney