The withholding obligation in the Netherlands
The party that has the legal obligation to withhold payroll tax and premiums is known as the ‘withholding agent’. In most cases this is the employer, but it is also possible that the actual employer transfers this obligation to a third party, like for instance its Dutch subsidiary, or a non-related payroll company or employment agency.
The withholding agent must withhold the wage tax and premiums from the salaries of the employees, report the amounts withheld to the tax office in a monthly tax return and actually pay the amount due to the tax office within one month after the month to which the salaries relate. These withholdings and payments should occur within certain deadlines and the payments should bear specific reference numbers. At the beginning of each year the details on the filing of wage tax returns and the accompanying payment of Dutch wage taxes (incl. deadlines) are provided in a letter from the Dutch tax authorities.
The withholding agent needs to withhold the payroll taxes in the month that the employee receives his wage payment, benefit in kind or fringe benefit. If this is not done (properly or timely) the withholding agent may be held liable for the amounts due and risks to be charged with penalties and interest. When the employer decides not to recoup the amounts due from the salary of the employee, the tax due may have to be considered taxable wages itself as consequence of which tax is charged over tax (gross up).