Here we have compiled a list of frequently asked questions about payroll taxes in the Netherlands that our payroll and HR specialists regularly get asked. If your business needs support setting up their operations, or have a specific challenge involving employment in the Netherlands, don’t hesitate to reach out to our team of specialists!
What is the Netherlands payroll tax rate?
According to the most recent insights gathered by the IRS, the income tax rate for the Netherlands ranges from 2.30% for low-income earners, and up to 52% for high income earners. The Netherlands has a progressive, bracketed income tax system where each portion of income is taxed at a progressively higher rate. View the table on this page for more information about the tax rate for each bracket.
Who are Netherlands payroll providers?
Payroll providers in the Netherlands provide a special form of hiring staff (‘payrolling’ in Dutch). The payroll provider will hire staff on their payroll, while the day-to-day responsibilities are decided by the payroll provider’s client (the company).
Why are the Netherlands taxes so high?
European countries have notoriously high tax rates – but the advantages and benefits residents of these countries receive usually make the extra costs worth it. The Dutch tax rate covers several social programmes, including unemployment, health insurance, sickness benefits, etc. You can read more about how the money collected from income tax is spent in the Netherlands on our blog here.
What is payroll tax?
It is necessary to pay “payroll tax” if you employ people in the Netherlands. As an employer, you are responsible for withholding the necessary amounts from your employees’ wages. You can read a breakdown of payroll tax in the Netherlands on our blog here. Payroll tax in the Netherlands consists of wage tax and social security contributions.
What does payroll cost?
Payroll costs for the Netherlands are generally determined by the amount of salary, costs of statutory/required benefits such as social security contributions, and cost of any additional benefits offered to employees. If your staff is hired through a payroll provider or payroll company, they will implement a payroll factor on top of an employee’s wages to cover statutory/required benefits of the Netherlands.
What is the payroll tax discount in the Netherlands?
In the Netherlands, the payroll tax discount (arbeidskorting or heffingskorting in Dutch) is dependent on (1) the type of wages you pay to the employee and (2) the employee’s age. The Dutch Tax Authority has uploaded a tool and tax table to find out which discount rate is right for the employee. View the table here (in Dutch).
What is the 30% ruling?
The 30% ruling is a tax credit available to expats who live and work in the Netherlands. It was developed to make working in the Netherlands more attractive for expats who may not intend to live in the Netherlands long-term. Read more about this ruling on our blog here.
What is the payroll tax credit in the Netherlands?
The payroll tax credit (arbeidskorting or heffingskorting in Dutch) refers to a certain discount the employee receives on their income tax and social security contributions. There are several different payroll tax credits available for different situations. The Dutch Tax Authority has uploaded a tool and tax table to find out which tax credit is right for the employee. View the table here (in Dutch).
How do I get a payroll tax number for the Netherlands?
To get a payroll tax number for your business in the Netherlands, you must register your business with the Dutch Chamber of Commerce (Kamer van Koophandel in Dutch). We wrote an article about how to register your business in the Netherlands on our blog here. If you do not have an entity in the Netherlands, it is also possible to payroll your staff via a payroll company or payroll provider.
Do I qualify for the 30% ruling?
As an expat, you know you qualify for the 30% ruling when you meet the following criteria:
- You are employed by a business registered in the Netherlands
- You and your employer agree in writing that the 30% ruling is applicable
- You have not lived in, or near, the Netherlands within the last 16 months.
- You will be paid the minimum salary criteria for Highly Skilled Migrants
Review the checklist about qualifying for the 30% ruling on our blog.
How much do I pay in tax and premiums in the Netherlands?
The average tax-paying resident of the Netherlands paid 28.7% of their salary in taxes in 2020. The exact cost of tax and premiums you can expect to pay in the Netherlands are based on the amount of salary earned, and the amount of additional (non-salary) benefits paid you receive.
Why is payroll tax withheld from the salary?
Payroll tax is withheld from the employee’s salary by their employer or payroll manager to pay to the Dutch government in the employee’s name. Employers in the Netherlands must withhold payroll tax from their employee’s salary.
What types of employment contracts are there in the Netherlands?
There are basically five (5) standard types of employment contracts in the Netherlands. There are temporary (tijdelijk) contracts, permanent (vast) contracts, Payroll or recruitment agency (uitzendcontract) contracts, Zero-hour (nul uren) contracts, and freelance contracts (DBA modelovereenkomst).
Can I terminate an employment contract?
It is only possible to terminate an employment contract in the Netherlands with specific permission from the UWV (Dutch unemployment agency). There are basically four (4) different situations that constitute as “fair” grounds for dismissal of an employee in the Netherlands. Those situations are (1) dismissal by mutual agreement, (2) dismissal due to economic reasons (3) employee has a long-term incapacity to work or (4) Urgent case involving serious neglect or destructive conduct. Read more about termination procedures for the Netherlands on our blog.
How can I hire highly skilled migrants?
It is only possible for companies who have been registered with the Dutch Immigration Department (IND) as a Recognized Sponsor to relocate somebody via the “Highly Skilled Migrant” visa. If your company has another office or entity in the Netherlands, it may be possible to bring them over via the Intercorporate transferees (ICT) visa.Payroll providers or payroll companies in the Netherlands that are recognized sponsors can employ highly skilled migrants on behalf of these companies. Our immigration specialists provide information about how to bring expats to the Netherlands with the Highly Skilled Migrant visa in this video.
How can I hire an employee in the Netherlands without an entity?
It It is only possible to hire and pay wages toemployees who live in the Netherlands without a Dutch entity (unless your business has received an exemption by the Chamber of Commerce) via an existing Dutch business entity. A payroll company or payroll provider registered in the Netherlands can hire staff, and even freelancers, on behalf of their client (in this case, your company) which enables the client to run the day-to-day operations of the hired staff or freelancer.
My application to be an IND sponsor was rejected, what can I do?
It is possible that your company’s application to be an IND recognized sponsor is rejected. In that case, a payroll provider or company can support hiring expat staff on short notice while your business re-submits the application. Consult with an expert if your application is continually rejected.
Which HR functions can I outsource?
Most HR functions needed for a company to operate can be outsourced to a third party. A few examples of HR functions that can be outsourced include:
- Employee payroll management
- Sickness/time-off management
- Recruitment processes
- Onboarding/offboarding
- Performance tracking
- Training and professional development
- Policy writing/updating
- Document creation
- Conflict management
- Employee engagement initiatives
In many cases, it is also possible to outsource strategic tasks in the form of HR consultancy. HR functions are necessary for any company to operate, but it’s not always possible (or economical) for a business to invest in in-house HR.
Is it possible for me to work for a foreign company and live in the Netherlands?
It is possible to work for a foreign company while living in the Netherlands — under specific conditions. However, it is important to evaluate the laws of the country you intend to work to avoid double taxation (in other words being taxed both in the Netherlands, as well as the foreign country) or losing residence status of the Netherlands.
