Employee taxation in the Netherlands
The taxation of employees in the Netherlands consists of the levy of personal income tax and social insurance contributions.
The employer has a withholding obligation for taxes due on the employee’s salary (wage tax) and the social security contributions due on the employee's salary.
The Dutch social security contributions consist of the national social insurance contributions and the employee social insurance contributions.
The national social insurance contributions are due by every Dutch individual taxpayer, regardless of the nature of the income. The levy of these national social insurance contributions is integrated in the income tax and wage tax levy.
The employee social insurance contributions are only due by the employer and employee on account of qualifying employment income. The levy of the employee insurance contributions is separated from the levy of income tax.
For employees who are temporarily assigned to the Netherlands an exemption from the Dutch social insurance system may apply by virtue of applicable treaties and/or EU regulations.
Resident individuals are subject to individual income tax on their worldwide income.
Income earned outside the Netherlands may qualify for an exemption by virtue of applicable tax treaties or the Dutch unilateral rules for the avoidance of double taxation.
Non-residents are only subject to individual income tax on certain types of Dutch source income, including
- income from employment
- real estate situated in the Netherlands
- income derived from shareholdings in a Dutch corporation, provided that the interest in the business equals or exceeds 5% of the shares
Special rules apply to certain categories of taxpayers like for instance sportsmen or artists.
The center of vital life interest is decisive for determining wheher someone qualifies as a Dutch resident. This includes physical presence of the taxpayer and his family in the Netherlands, a permanent home, etc.
Under most tax treaties a foreign employee who is assigned to the Netherlands by a foreign employer is exempt from Dutch income tax/wage tax if the employee's working days in the Netherlands do not exceed 183 days in a year. This rule generally does not apply if the foreign employee has a Dutch employer. Special rules may apply for foreign based employment agencies.
The Dutch individual income taxation is based on three types of income (boxes of income). Each box has its own tax rate:
Box 1: taxable income from work and home (progressive rate, see under Dutch tax rates for individuals - 2017)
Box 2: taxable income from substantial shareholdings (fixed rate of 26.9% in 2021)
Box 3: taxable income from savings and portfolio investments (fixed rate of 31% over a fictitious income of 1.898% to 5.69% (2021))
Each form of income is taxed in one box only (all "emoluments" of employment - for example, salary, bonus, company car and benefits in kind - are subject to income tax in Box 1). There can never be double taxation as a result of taxation in more than one box at the same time. If the income in one box is negative, this can in most cases not be offset against positive income in another box. However, it is in principle possible to offset the negative amount against a positive income in the same box in past or future years (for box 1 and box 2).
The personal income tax year equals the calendar year.
Wage tax and national social insurance contributions
Wage tax or wage withholding tax ('Loonbelasting') is an advance payment for the individual income tax. Wage tax and national social insurance contributions ('volksverzekeringen') are levied jointly by the employer on income from employment.
All Dutch employers, including non-resident employers with a permanent establishment in the Netherlands, are obliged to withhold wage tax and national social insurance contributions from salary payments and, in this respect, act as a withholding agent for the Dutch tax authorities.
The rates are progressive and depend on the income and accompanying bracket. For the rates we kindly refer to the page Tax rates for individuals - 2020. Wage tax rates are basically equal to individual income tax rates, although through the much broather taxable basis of the income tax the ultimate effective rates may deviate. However, for many individuals the wage tax is a final tax.
Depending on the level of income from employment and taxable income or applicable deductions, individuals may have the legal obligation to file a personal income tax return. The filing of a tax return is followed by the issuance of a tax assessment in which the wage tax already paid is offset against the final income tax liability, determining the final personal income tax payable or refund.
Employee social insurance contributions
In addition to the national social insurance contributions that are included in the lowest two income tax brackets, social security contributions ('werknemersverzekeringen') on employment income are payable by employees. The contributions are calculated on gross salaries (with a maximum amount), less pensions premiums withheld and adjusted for some technical differences with the income for tax purposes.
Employees furthermore pay a social insurance contribution (including medical insurance) and an unemployment insurance contribution.
The rates depend on your line of business. For more information please contact us.
For an overview of the 2020 rates for the Dutch personal income tax and the national social insurance contributions we refer to the page Dutch tax rates for individuals - 2020.
Expatriate incentive - the 30%-regulation
The Dutch tax system provides for a special incentive for foreign employees who are assigned to the Netherlands if they meet certain criteria. In essence, the incentive allows the employer to pay the employee a tax free allowance of up to 30% of the gross salary. For more information about this incentive we refer to the page Expatriate incentive: the 30% regulation.
The Dutch tax system provides special rules for the treatment of (foreign) employee stock option plans.
This generally means that options are considered to be part of the employee’s taxable wages. In most cases the employer has a withholding obligation, even if the options are granted by another (group) company. Special rules apply for determining against which value and exactly at what moment the options are taxed.
For more information about this subject, we refer to the page Investing in the Netherlands - Employee stock option plans.
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| Dealing with tax compliance matters |
| Negotiation tax rulings |
| Representation in tax audits |
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