Taxes in The Netherlands vs Spain: Which should I pay?

It’s no surprise that you’re considering living permanently or for an extended time in a global tech hub like Amsterdam or in a Spanish destination, a world leader in international tourism.

Deciding to travel or start a business in any destination is not an easy task; it involves researching accommodation, quality of life, and, of course, the taxes you will be subject to during your stay. That’s why, before packing your bags, take a look at the taxes in the Netherlands vs. Spain and where it is more beneficial to declare your income.

At Holafly, we clear up your doubts about the types of taxes, the tax rates in these countries, and possible benefits you may be eligible for. Don’t waste any more time and find out with us.

How Do Taxes Work in the Netherlands vs. Spain?

Before choosing between the Netherlands vs. Spain, you need to understand their taxes and the main features of their tax systems. We’ll give you a heads-up that both have marked differences in terms of fiscal priorities, complexity of the process, and centralisation of the system. Here are their main aspects to give you an idea of what to expect when declaring your income as an individual or a company:

The Netherlands: Centralised National System

The tax system in the Netherlands is managed by the Belastingdienst (Dutch Tax Authority). It is organised into three income categories:

1. Box 1: taxes on income from work and housing.
2. Box 2: taxes on income from significant shareholdings in companies.
3. Box 3: taxes on income from savings and investments.

Taxes in the Netherlands are uniform at a national level, with no significant regional variations. This makes the system more predictable and less complicated in terms of tax compliance.

A standout feature of the Dutch tax system to attract international talent is the 30% ruling, which allows qualified expatriates to receive up to 30% of their gross salary tax-free for the first five years.

Spain: A Decentralised and Diverse System

In contrast, the Spanish tax system combines national, regional, and local taxes. This means that, in addition to complying with the general regulations of the country, residents must consider the specific rates and deductions of their autonomous community. For example:

• Regions like Madrid offer significant discounts on property tax.
• Areas like Catalonia apply higher rates on certain taxes.

A notable feature of Spain’s taxes is the mandatory wealth tax, which taxes the net value of a person’s assets above certain thresholds. This tax does not exist in the Netherlands, which is beneficial for individuals with high net worth.

Spain is also characterised by the progressivity of its Personal Income Tax (IRPF), where the rates increase for high incomes.

This might be less attractive for high-income individuals, but residents with medium and low incomes tend to benefit from more generous deductions and tax credits.

Tax System Comparison: Netherlands vs. Spain

Choosing the best country to settle in will depend on your priorities, whether low income, high wealth, or business innovation.

Taxes in the Netherlands vs. Spain for Businesses

When deciding where to set up a business, comparing taxes in the Netherlands vs. Spain is essential to predict potential benefits or tax cost reductions. Let’s see how some of the main taxes and tax benefits work in these countries.

Corporate income tax

In the Netherlands, corporate tax has a progressive structure:

• 19% for the first €200,000 ($217,000) of profits.
• 25.8% for profits exceeding that amount.

Example: If your business generates €300,000 ($326,000) in profits, the first €200,000 ($217,000) will be taxed at 19% (€38,000 ($41,100)), while the remaining €100,000 ($108,500) will be subject to 25.8% (€25,800 ($28,100)), resulting in a total of €63,800 ($69,200) in taxes.

In Spain, the general rate is 25%, regardless of the profit amount. However, startups can benefit from a reduced rate of 15% for the first two years of activity when they make profits.

Example: A new startup in Spain with €300,000 ($326,000) in revenue would pay €45,000 ($48,700) during the first two years.

VAT for businesses

The standard VAT in both countries is 21%, but there are differences in the reduced rates:

• In the Netherlands, there is a reduced rate of 9% for products such as food and medicines.
• In Spain, there is a reduced rate of 10%, and a lower rate of 4% for essential goods like bread, milk, or books.

This means that a company in Spain selling basic goods worth €50,000 ($54,400) could pay VAT at 4% (€2,000 ($2,170)), while in the Netherlands, that same company would pay VAT at 9% (€4,500 ($4,870)).

Tax Benefits for Businesses in the Netherlands vs. Spain

The Netherlands is a very attractive country for tech and innovative companies due to specific benefits such as:

• IP Box: allows taxing income derived from patents or intellectual property at a reduced rate.
• Deductions for research, development, and innovation (R&D+i).

Spain also encourages R&D+i investment, but to a lesser extent. Similarly, businesses can take advantage of additional regional incentives depending on the area.

 Where is it Better to Pay Taxes as a Legal Entity?

If your business is in the innovation sector, such as renewable energy or pharmaceutical technology, The Netherlands could be the best option due to its specific incentives like the IP Box and its progressive tax rates that favour medium-sized businesses. On the other hand, for traditional startups like online stores, consulting agencies, or design firms, Spain may be more beneficial due to the reduced 15% rate during the first years.

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Taxes in the Netherlands vs. Spain for Individuals

As an individual considering moving to either of these countries, you should also look into the differences between taxes in the Netherlands vs. Spain.

VAT in the Netherlands vs. Spain

VAT is similar in both countries, with a general rate of 21%. In Spain, there are reduced rates (10% and 4%) that provide more relief for consumers on essential goods.

Example: If you buy basic food items for €500 ($540):

• In Spain, you could pay a reduced VAT of 4%, which equals €20 ($21.70).
• In the Netherlands, with a VAT of 9%, you’d pay €45 ($48.80).

This makes Spain more economical for everyday consumers.

Income Tax

The income tax in the Netherlands is progressive:

• 37.48% for income up to €76,817 ($83,400).
• 49.5% for income above that.

In Spain, the national rates range from 19% to 47%, but regional governments can increase or reduce these percentages. Notably:

• In Madrid, the maximum combined rate is 45%.
• In Catalonia, it can go up to 50%.

An expatriate earning €100,000 ($108,800) annually could be eligible for the 30% rule in the Netherlands, paying taxes only on 70% of their income (€70,000 ($76,000)). Applying the 37.48% rate to income up to €76,817 ($83,400), the tax would be approximately €26,236 ($28,500).

In Spain, with no equivalent tax benefits, and assuming a combined rate of 47% for income above €300,000 ($326,000), the tax on €100,000 ($108,800) would be approximately €45,000 ($48,700), depending on the autonomous community of residence.

Where is it Better to Pay Taxes as an Individual?

Spain is more favourable for individuals with medium or low incomes due to its deductions and lower progressive rates at those levels.

The Netherlands is ideal for qualified expatriates, as the 30% exemption drastically reduces their tax burden.

Example: An expatriate worker earning €70,000 ($76,000) could pay approximately €18,700 ($20,300) in the Netherlands under the 30% rule, compared to the €26,000–30,000 ($28,100–32,500) they could pay in Spain depending on the region.

The Netherlands vs. Spain, Where Are Taxes Lower?

It’s important to be clear that determining where it’s better to pay taxes in the Netherlands vs. Spain depends on your profile as a taxpayer, your income, assets, needs, and priorities.

The Netherlands is more competitive for innovative businesses and multinational companies due to its specific tax benefits, while Spain favours traditional startups with lower initial tax rates.

Spain is more suitable for those with low or medium incomes due to its deductions and lower tax rates. On the other hand, The Netherlands benefits highly skilled foreign workers with unique incentives like the 30% exemption.

In general, Spain offers greater flexibility and tax reductions in a variety of contexts, while the Netherlands compensates with a more direct system and benefits aimed at specific niches.

Tax Comparison: Netherlands vs. Spain

The debate about taxes in the Netherlands vs. Spain not only depends on the country and tax system but also on whether you’re an individual or a company.

The Netherlands stands out for its simpler tax system, being a country that dominates maritime and agricultural trade, offering benefits to expatriates and innovative businesses.

Meanwhile, Spain offers more flexibility with local deductions, though with more complexity and bureaucracy in the processes.

With this valuable information, you’re now ready to grab a pencil and paper, calculate your taxes, and identify which country suits you best for tax declarations.

Here’s a summarised version of the data, which will help you make your decisions. Have a good trip!

Taxes for Individuals

Taxes for businesses or legal entities

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