Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. The Netherlands is no exception, with fines, sanctions and other penalties applying for not complying with the complex and many-layered aspects of taxation.
Global expansion is a great way to grow your business and the Netherlands offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO-service we will take care of the complicated legwork so that you can focus on your business goals in the Netherlands.
We have made it our goal to keep track of the latest changes in tax policies to always ensure complete compliance. To keep you informed and updated too we created this guide which includes the basic facts regarding tax regulations in the Netherlands.
Overview of Taxes in the Netherlands
- Individual Income Tax: Up to €68,507 (US$80,330) - 37.10%; Above that - 49.50%
- Social Security Taxes: National Social Insurance - 27.65%
- Value Added Tax (VAT): Standard rate - 21.00%; reduced rate (food, medicines for example) - 9.00%
- Corporate Taxes: Standard rate - 25.00%; SMEs first €200,000 (US$234,500) of taxable income - 16.05%; Some categories of intellectual property - 9.00%
- Withholding Tax (WHT): 15.00%
Netherlands Individual Tax – Single, Married
Dutch residents are taxed on total income from all worldwide sources. Both residents and non-residents must pay personal tax on income sourced in the Netherlands and usually fit into Box 1, which includes all income from salaries, bonuses, self-employment, and directors’ fees. A National Social Insurance contribution of 27.65% is also deducted at some income levels.
Box 1: Income from employment and National Social Insurance - Resident and non-resident individuals’ taxable income
- Up to €35,129 (US$40,816) + 27.65% Social Insurance: 37.10%
- €35,129 to €68,507 (US$79,560) + no social insurance: 37.10%
- Over €68,507 + no social insurance: 49.50%
Married couples are considered ‘fiscal partners’ and can file joint tax returns.
Other Taxes that might affect an individual's income include:
- National Insurance Tax (deducted from income)
- Employee Insurance Tax (paid by employers with rates depending on the industry and sector)
- Inheritance, Estate and Gift taxes vary between 10% and 40%
- Property Tax (assessed annually)
- Transfer Tax applying to transferring property ownership
- Insurance Tax of 21% paid by Dutch residents on premiums
Netherlands’ Individual Tax Rules
- Wage tax deductions and National Insurance Tax contributions are remitted by employers to the Dutch Tax and Customs Administration (Belastingdienst)
- The tax year runs from January 1 until December 31
- Even if tax has been withheld from salary, some individuals are required to also complete a tax return and are informed by Belastingdienst and sent a form to declare previous year’s additional income or items for tax relief
- Tax returns should be filed between March 1 and April 30
- Dutch residents are taxed on worldwide income
- Non-residents are tax on Dutch-sourced income
- Individuals are considered tax resident if they have lived in the Netherlands for over a year or reside there with their families
- Individuals are usually taxed in Box 1 of the three-tier Dutch system, covering taxable income from salaries, bonuses, self-employment, and directors’ fees
Value Added Tax and Excise Duty
The standard rate is 21% on goods and services, with 9% applying to such as food and drink, medicines, books, and newspapers. A zero rate typically applies to goods, services, imports, and exports between EU members, as well as categories including medical, educational, banking and insurance services. Luxury excise taxes apply to such as cigarettes, cigars, alcohol.
Netherlands Employers’ Social Security and Statutory Costs
Employee Payroll Taxes for Box 1
- Old Age Pension (AOW) - 17.90%
- Orphans and Widow/Widower Pension (ANW) - 0.10%
- Long Term Care (WLZ) - 9.65%
Total Employee Cost - 27.65%
Employer Payroll Taxes
- Unemployment Insurance (WW): 2.70% or 7.70%
- Health Insurance: 7.03%
- Child Care Premium: 0.5%
The total employment Cost - 10.23% or 15.23%.
Unemployment Insurance (WW) depends according to type of contract. The lower rate is applicable to employees with a contract of indefinite duration, the higher rate to employees with a temporary contract.
Other statutory employer costs include the National Minimum Wage.
The minimum wages paid to employees over the age of 21 in full-time employment increased from €1,684 to €1,701 (US$1,997) from July 1, 2021. The new weekly rate is €392.55 (US$460) and €78.51 (US$92) per day.
Netherlands Corporate Taxes
Resident business owners in the Netherlands must pay Dutch taxes covering income, turnover and profits, VAT, municipal and environmental taxes. Owners of international businesses may also face import duties with all payments due to the Dutch Tax and Customs Administration (Belastingdienst).
Companies are taxed on their worldwide income and must file returns for income tax (inkomstenbelasting) and corporate tax (vennootschapsbelasting). Taxes include:
- Corporate Tax: The standard rate is 25% with 16.5% applying to the first €200,000 (US$234,500) of taxable income for Small and Medium Enterprises (SMEs), and 9% to some categories of intellectual property.
Resident companies are taxed on their worldwide income, whether private or public limited companies. Foreign companies are considered resident if incorporated under foreign law but managed in the Netherlands.
- Turnover Tax (BTW) or Value Added Tax (VAT) is applied to most goods and services supplied, which can be zero-rated or set at 9% or the standard rate of 21%. Businesses can usually reclaim VAT on purchases and file returns monthly, quarterly, or annually.
- Dividend Tax: This is due on any profits distributed to shareholders.
- Withholding Tax: The standard rate on dividends is 15%, with exemptions available for European Union and European Economic Area member state residents.
- Capital Gains: Where they apply, gains are taxed as general income if they come above a certain rate.
Corporate Deductions and Capital Allowances
Property is subject to strict regulations regarding depreciation and land does not qualify. Maintenance costs are tax deductible. Sale of depreciated assets can attract taxes. Bad debt can qualify, as can donations to qualifying charities up to a maximum of €2,500 (US$2,930).
Avoid risks and make the right move!
Netherland tax regulations demand expert advice for incoming foreign companies. Businesses cannot risk stumbling into mistakes over payroll and taxation, running the risk of fines and sanctions. Do not waste time worrying about your move into the Netherlands, and work with Bradford Jacobs, an Employer of Record (EOR). We will ensure complete compliance during your expansion, and can have your new employees up-and-running in days!
Interested in learning more about how we can help you with your payroll and tax issues? Contact us today!