Tax Effects of Grants in the Netherlands

This guide outlines the Dutch tax implications for receiving grants, particularly for projects within the Effective Altruism (EA) sphere. It applies to Dutch tax residents, including non-Dutch nationals living in the Netherlands. We aren’t tax specialists, but we prepared this in consultation with an advisor with expertise in tax and charitable work. 

Determining if a Grant is Income or a Donation

The tax treatment of a grant depends on whether it’s classified as (taxable) income or a donation. Here are key considerations:

Factors Suggesting a Donation:

• No expectation of specific services or work in return (quid pro quo)
• One-time, non-recurring payment
• No contractual obligation for the recipient
• Giver has charitable or philanthropic intent

Factors Suggesting Taxable Income:

• Expectation of specific services, work, or project outcomes (quid pro quo)
• Regular or recurring payments
• Contractual obligations or reporting requirements
• Tied to professional activities or expertise of the recipient

Note: Dutch tax authorities often view grants as taxable income, even with limited quid pro quo.

Obtaining Certainty

If you’re unsure about the classification of your grant, you can seek clarity from the Dutch tax authorities:

1. Write a detailed letter to the tax authorities. The letter should include:
   • Your personal details (name, address, BSN number)
   • Details of the grant (amount, source, purpose, any conditions attached)
   • A clear explanation of why you believe it might be a donation or income
   • Any supporting documents (e.g., grant agreement, correspondence with the grantor)
   • A specific request for their official qualification of the grant
2. Address your letter to your local tax administration office. Check your last tax assessment for the address. 
3. Alternatively, you can call the Tax Information Line:
   • Number: 0800 – 0543 (free calls from the Netherlands)
   • Hours: Monday to Thursday: 8:00 – 20:00, Friday: 8:00 – 17:00
   • This service is for residents of the Netherlands with questions about taxes and benefits in the Netherlands
4. Be prepared to wait for a written response, which may take several weeks to months.
5. Keep copies of all correspondence for your records.

Seeking official clarification can provide you with more certainty about your tax obligations and help prevent potential issues in the future.

Tax Implications

If Classified as a Donation:

1. Personal Income Tax: Generally no impact, except for box 3 (see next bullet)
2. Wealth Tax (Box 3): May affect wealth tax if received as a lump sum
3. Gift Tax:
   • Due if received from a Dutch tax resident person or entity
   • Exempt if received from a Dutch Public Benefit Organization (ANBI)
   • Not applicable if received from abroad
4. Social Benefits: May affect eligibility for rental support (‘huurtoeslag’) and care support (‘zorgtoeslag’)
   • 2024 wealth thresholds for singles:
     • Rental support: €36,952
     • Care support: €140,123

If Classified as Income:

• Taxable in Box 1 at progressive rates (maximum 49.5%)
• Classified as either: a. Results from other activities (‘resultaat uit overige werkzaamheden’) b. Periodic payments (‘periodieke uitkeringen’), if paid in multiple installments or future payments are expected. If the grant is taxed as ‘Results from other activities’ (as quid pro quo is involved) connected costs paid from the grant are deductible for tax purposes.

Reporting in Dutch Tax Return

If the Grant is Taxable Income:

1. Report in your annual Dutch personal income tax return (aangifte inkomstenbelasting)
2. Deadline: Usually May 1st of the year following the tax year
3. File through: www.belastingdienst.nl
4. Report as either:
   • “Income from other work” (Inkomsten uit overig werk), or
   • “Pensions and other benefits” (Pensioen en andere uitkeringen)

Distinguishing Between “Income from other work” and “Pensions and other benefits”:

• “Income from other work” (Inkomsten uit overig werk):
  • Use this category if the grant is related to work or activities you perform
  • This includes one-time or multiple payments for specific projects or ongoing work
  • Example: A grant to conduct research or complete a specific project
• “Pensions and other benefits” (Pensioen en andere uitkeringen):
  • Use this category for regular payments not directly tied to work activities
  • This includes periodical payments intended for general support
  • Example: A monthly stipend to support your studies or living expenses

If you’re unsure which category applies to your grant, consider:

1. The purpose of the grant (work-related vs. general support)
2. The payment structure (one-time vs. regular payments)
3. Any conditions or expectations attached to the grant

When in doubt, you can:

1. Consult the explanatory notes in the tax return form
2. Use the Tax Information Line (0800 – 0543) for guidance, but don’t take their word as gospel
3. Seek advice from a tax professional
4. Request clarification from the tax authorities as described in the “Obtaining Certainty” section

If the Grant is Not Taxable Income (i.e., Considered a Donation):

1. Generally, no need to report in your income tax return
2. May need to report in the wealth tax section (Box 3) if it significantly increases your assets
3. Be prepared to explain the nature of the grant if questioned by tax authorities

Additional Impacts

• Taxable grants may affect eligibility for rental and care support
• 2024 Income Thresholds for singles:
  • Care support: €37,496
  • Rental support: Varies depending on situation (check Dutch tax authorities’ website for calculation)

Special Considerations

• Different rules may apply to foreign nationals receiving grants from their home countries
• Local tax consequences and implications in the grant-providing country may also arise
• Specific situations may lead to different outcomes; consult a tax professional for personalized advice

Remember: This guide provides a general overview. For specific cases, professional tax advice is recommended.