Heffingskorting (Dutch Tax Credits)
Definition
The Dutch system of tax credits that directly reduce the amount of tax owed. The two main credits are the algemene heffingskorting (general tax credit, up to €3,362 in 2025) and the arbeidskorting (employment tax credit, up to €5,532). Both credits phase out as income increases. These are automatically applied by employers through payroll, similar to how the UK's PAYE works.
Example
A Dutch worker earning €40,000 would receive approximately €2,888 in general tax credit and €4,900 in employment tax credit, reducing their effective tax rate significantly.