What should you know before moving to the Netherlands as a US Person?

Moving to the Netherlands as a US Person: financial points to know before you go

Moving to the Netherlands is a major step. You will be dealing with a new country, a different healthcare system, a different banking environment and a different tax system. But as a US Person, you also bring your US tax obligations with you.

This does not only apply to US citizens who move to the Netherlands temporarily. Dual nationals, Green Card holders and Accidental Americans may also still be required to file annual US tax returns.

That can affect your bank accounts, investments, pensions, home, business and estate planning. In this article, we set out the main financial topics to consider before moving to the Netherlands.

This article is not a substitute for personal advice from a US tax advisor, CPA or Dutch tax specialist. It is intended as a practical starting point.

1. Your US tax obligation moves with you

The United States taxes its citizens and certain residents on their worldwide income. This means that, as a US Person living in the Netherlands, you will usually still need to file a US tax return each year using Form 1040.

An FBAR may also be required. If you have foreign financial accounts – meaning accounts outside the United States – and their combined highest value exceeds $10,000 at any point during the year, you may need to file an FBAR using FinCEN Form 114.

Filing a return is not the same as paying tax. In many situations, the combination of the tax treaty, the Foreign Tax Credit and sometimes the Foreign Earned Income Exclusion helps prevent effective double taxation. But the filing obligation itself remains.

Short stay or long term?

Before you leave, think carefully about how long you expect to stay in the Netherlands.

If you are coming for a few years, for example for a temporary assignment or secondment, it may be sensible to keep certain parts of your US financial life intact. This could include a US bank account, retirement account, brokerage account or home.

If you are coming for the long term or permanently, it becomes more important to build a solid financial base in the Netherlands. Think about health insurance, pension contributions, mortgage options, investments, estate planning and possibly entrepreneurship.

That choice influences almost every other point in this article.

2. The 30% ruling can be financially important

For employees recruited from abroad, the Dutch 30% ruling can be a significant benefit. Under certain conditions, an employer may pay part of the salary tax-free as compensation for extra costs related to living outside the employee’s home country.

The ruling does not apply automatically. Your employer must apply for it, and you must meet specific conditions, including requirements around expertise, salary and previous periods of residence or work in the Netherlands.

Also note that the 30% ruling has changed in recent years and may change again. In general, a ruling may apply for a maximum of five years, but the actual treatment depends on your situation and the date on which the ruling was granted.

For US Persons, there is another important point: the 30% ruling is a Dutch tax benefit. On your US tax return, you must generally still report your worldwide income. How this works in the United States depends on your total income, family situation and the US filing position chosen.

3. The tax treaty usually prevents double taxation

The Netherlands and the United States have a tax treaty. The treaty determines which country may tax which type of income in specific situations. In practice, if you live in the Netherlands, you often pay Dutch tax first. Double taxation is then usually avoided on the US side through the Foreign Tax Credit or, in some cases, the Foreign Earned Income Exclusion.

Which option is most beneficial depends on your personal situation. The Foreign Earned Income Exclusion may seem attractive, but it is not always the best choice. Dutch tax, the 30% ruling, children, business ownership and future pension planning can all affect whether FTC or FEIE is the better route.

Report worldwide income in both countries

A common misunderstanding is: “This income has already been taxed in the Netherlands, so I do not need to report it in the US.”

That is usually not correct.

To apply treaty benefits and tax credits properly, you must report fully and accurately in both countries. Leaving out income because it has “already been taxed somewhere else” can lead to problems later, especially during an audit or when correcting past filings.

4. Think about business ownership before you move

Do you already own a US business? Or are you planning to start a business in the Netherlands? Then preparation is especially important.

The Netherlands and the United States treat business structures, profits, dividends, salary, share ownership and reporting obligations differently. A structure that seems logical to a Dutch accountant may be tax-inefficient or administratively burdensome for a US Person.

A common example is the Dutch combination of an operating BV and a personal holding BV. This structure is widely used in the Netherlands. For a US Person, however, it should first be assessed how the United States will treat these entities. Possible reporting via Form 5471 may apply, as well as rules around CFC, Subpart F, GILTI and, in some cases, PFIC risks.

Have any business structure reviewed in advance by someone who understands both the Dutch and US tax consequences. It is often more expensive to fix a structure later than to set it up correctly from the start.

5. Opening a Dutch bank account is not always straightforward

Since FATCA, financial institutions outside the United States must take account of customers who are US Persons. Banks may need to report certain information about US account holders to the US authorities.

In practice, this means some banks are cautious about accepting US customers. This can be difficult if you have just arrived in the Netherlands and need an account for salary, rent, mortgage payments, health insurance or daily expenses.

Before you move, research which banks in the Netherlands accept US Persons. It is also advisable to keep a US bank account open during the transition period. This can be useful for ongoing payments, retirement accounts, US credit cards, taxes and possible rental income.

6. Be careful with Dutch and European investment funds

For US Persons, Dutch and European investment funds and ETFs are one of the biggest tax pitfalls.

Many non-US funds may fall under the US PFIC rules: Passive Foreign Investment Company. The consequences can be serious: additional tax, complex calculations, potentially unfavorable treatment of gains and annual reporting through Form 8621 for each fund.

This does not only apply to actively managed funds. It often also applies to European ETFs that are perfectly normal investments for Dutch residents.

A practical rule: do not buy Dutch or European funds as a US Person without first obtaining tax advice. Discuss your portfolio before moving with an advisor who understands both the US and Dutch sides.

7. What should you do with your 401(k), IRA or Roth IRA?

You usually do not have to close US retirement accounts such as a 401(k), traditional IRA or Roth IRA when you move to the Netherlands. In fact, early withdrawal may lead to US tax and possibly an additional penalty.

There are still important points to consider.

Not every US broker accepts clients with an address in the Netherlands. Some institutions restrict services once you live outside the United States. Check this before moving, so you are not unexpectedly confronted with limitations on account management, transactions or communication.

The Dutch tax treatment of US retirement accounts can also differ from what you are used to in the United States. This is especially relevant for Roth IRAs, distributions, value growth and reporting in the Netherlands.

8. US real estate: keep, rent out or sell?

If you own a home in the United States, make a deliberate decision before you move: keep it, rent it out or sell it.

If you sell your former primary residence, the US home sale exclusion may be relevant. Under certain conditions, you may exclude up to $250,000 of gain, or $500,000 for married couples filing jointly. The key condition is generally that you must have owned and used the property as your main home for at least two of the five years before the sale.

If you wait too long after leaving, this benefit may become partly or fully unavailable.

Renting out the property is also possible, but it creates additional administration. You may need to report rental income in the United States, for example through Schedule E, while also dealing with the Dutch tax treatment of foreign real estate. Exchange rates can also play a role, for example with mortgage debt, sale proceeds or refinancing.

9. Social security: avoid double contributions

The Netherlands and the United States have a social security agreement, also known as a totalization agreement. One of its purposes is to prevent someone from paying social security contributions twice on the same work income.

The agreement may also help work years in both countries count toward future rights, such as US Social Security or Dutch AOW. The exact outcome depends on your work status, length of stay, employer and contribution position.

Keep important documents safe: pay slips, employer statements, annual income statements, US Social Security records and Dutch pension information. You may only need them many years later.

10. Estate, gift and partner planning: two systems side by side

Estate planning is often overlooked when moving to the Netherlands. For US Persons, however, it is important.

The US estate tax has high exemptions, but the Dutch inheritance and gift tax system works differently and may become relevant at much lower amounts. For many people living in the Netherlands, Dutch inheritance tax is therefore the more practical concern.

If you have a non-US spouse, this deserves extra attention. US rules for gifts and estates between spouses differ when one spouse is not a US citizen.

Existing US trusts, family wealth, gifts to children or property in multiple countries can also make the situation more complex. A move is therefore a logical moment to review your will, beneficiaries, marital agreements and estate planning.

11. Get your US filings in order before you leave

Many Americans only discover after moving abroad that they have not been fully compliant for years. Sometimes Form 1040 is missing. Sometimes FBARs were never filed. Sometimes foreign accounts, investments, crypto, retirement accounts or businesses were not reported correctly.

Do not wait until you are already living in the Netherlands.

The IRS has procedures that may allow some Americans abroad to correct past filings, such as the Streamlined Filing Compliance Procedures. Whether you qualify depends on your situation.

Leaving with a clean slate is often easier than fixing problems later. Ideally, start gathering documents and reviewing your US tax position several months before your move.

In closing: moving to the Netherlands as a US Person requires thinking ahead

Most tax problems do not arise from bad luck. They arise from decisions that were not made in time.

The wrong investment fund. A forgotten FBAR. A BV structure that works differently in the United States than in the Netherlands. A US home sold too late. A broker that does not accept a foreign address. Or a retirement account whose Dutch treatment was never reviewed.

Americans Overseas is not a CPA firm and not a Dutch accounting firm. We do not provide personal tax advice.

What we do: we help you clarify your situation, explain which topics require attention and, where necessary, connect you with a US tax advisor, CPA or Dutch specialist from our network.

A first conversation with the Americans Overseas team is free and without obligation. It can be requested in English or Dutch.

Contact us for more information