Receive Tax Free Dividends in The Netherlands

--- by D. Petkovski ---

If you’re a long-term index investor residing in the Netherlands, you can receive dividends tax free.

Although I’m not a big fan of dividend investing, I still want to share some strategies that ETF investors can utilize without much effort.

Basically, you’d leverage the tax treaties and tax codes of different countries to legally avoid dividend tax in the Netherlands.

Table of Contents

Double Tax Treaties

All EU countries have tax treaties with each other to prevent double taxation.

These are applicable when multiple countries are involved, for example being employed in one country while residing in another. And if you paid a certain type of tax in one country, the other country won’t tax you again for the same thing.

This is also applicable for dividend taxes – if you’ve paid them in one country, you won’t be taxed again on the same amount.

Ireland’s Tax Treatment For Foreign Investors

Ireland doesn’t impose their dividend withholding taxes on foreign residents.

So if you invest in ETFs domiciled in Ireland as a non-resident, they would distribute the full dividend amount to you without withholding Irish taxes.

Luckily for index investors, most ETFs are domiciled in Ireland, probably including the ones you already hold: VWRL, VUSA or IUSA, etc.

Pro Tip: the ISIN codes of Ireland domiciled funds start with “IE” (example IE00B3RBWM25 for VWRL).

Avoid Dividend Tax in The Netherlands

In summary, this is the sequence of events:

Ireland distributes dividends to you, applying the Irish non-resident dividend tax rate of 0%
Netherlands doesn’t charge you dividend taxes because you already paid the applicable rate in Ireland

So next time you read about the Double Irish Dutch Sandwitch strategy that corporations use, remember that you can also leverage the tax codes of multiple jurisdictions to minimize your taxes in a legal way.

FAQs and Afterword

Is This Legal?

Of course!

Tax avoidance is not tax evasion.

You’re never hiding anything from the tax authorities. You actually need to report how much dividends you received and from which investments. And then, they charge you €0 themselves.

Always play by the rules, never lie on your tax declaration, and minimize your taxes legally.

What If I Use a Dutch Broker?

It’s not relevant which broker you use.

As long as the investment itself it domiciled in Ireland, this rule applies.

What If I Send the Dividends on my Dutch Bank Account?

It’s not relevant where and how you send your money.

The dividend distribution itself is the taxable event, which originates from Ireland.

How you manage your cash afterwards is non-taxable anyway.

Do I Need To Report If I Reinvest the Dividends?

If you’re planning to reinvest the dividends, my recommendation is not receiving them in the first place.

Almost all distributing ETFs have an accumulating alternative, which reinvest the dividends within the fund itself. So they never reach investors’ accounts and thus not creating a bureaucratic burden of reporting them etc.

Check my EU Investors Handbook for detailed analysis on specific ETFs and strategies.

Can I Use Other Investments?

You can, but you need to check two things:

The tax treaties between NL and the domicile country of the investment
The tax treatment of dividends distributed from that country to foreign investors

While it’s an interesting rabbit hole to be explored, most UCITS ETFs from the big players (such as Vanguard or BlackRock) are domiciled in Ireland. So having hundreds of options to choose from, there’s no point in picking third-tier ETFs that will most probably underperform a broad index in the long run.

For more intermediate strategies on investing and tax optimization from Europe, visit the free EU Investors Handbook.

Author

D. Petkovski

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