Our guide to Payroll in the Netherlands

Doing business in the Netherlands

The Netherlands is a small, but highly developed country in western Europe and has one of the strongest economies in the European Union (EU) with key industries including:

• Logistics & Trade (home to the port of Rotterdam, Europe's largest);
• Agriculture & Food Technology;
• Financial Services;
• Technology & Innovation;
• Energy (including offshore wind).

Investing in the Netherlands

The Netherlands offers a compelling combination of advantages that make it one of Europe's most attractive investment destinations. Its strategic location at the heart of Western Europe provides direct access to the European single market, serving as a gateway to over 450 million consumers. This geographical advantage is further reinforced by world-class infrastructure, with Schiphol Airport and the Port of Rotterdam ranking among the finest in Europe, ensuring seamless connectivity for businesses operating across the continent and beyond.

From a fiscal perspective, the Netherlands stands out for its extensive network of over 90 bilateral tax treaties, significantly reducing the tax burden on cross-border transactions. Investors also benefit from a highly favourable participation exemption, which provides a 100% exemption on qualifying dividends and capital gains, making the Netherlands a preferred jurisdiction for holding structures.

Beyond its financial and logistical merits, the country boasts a stable, transparent, and business-friendly legal system that provides investors with the certainty and predictability they need to operate with confidence. This is complemented by a highly educated, multilingual workforce, enabling companies to attract and retain top talent capable of operating in an international business environment.

The Netherlands Foreign Investment Agency (NFIA) is an agency of the Dutch central government, operating under the Ministry of Economic Affairs. The NFIA promotes and facilitates foreign direct investment into the Netherlands by assisting international companies seeking to establish or expand their presence. It provides advice on sectors, locations, incentives, and the regulatory environment, as well as facilitating introductions to relevant government bodies and business partners.

Basic facts about the Netherlands

Full name: Koninkrijk der Nederlanden (Kingdom of the Netherlands)

Population: 18,45 million

Capital: Amsterdam

Major language(s): Dutch

Monetary unit: Euro (EUR)

Main exports: Agricultural & food products, chemicals & pharmaceuticals, machinery & technology, energy, transport equipment.

GNI per capita: $ 84,970 (World Bank, 2024)

Internet domain: .nl

International dialing code: +31

How to Say

Hello: Hallo

Good morning: Goedemorgen

Good evening: Goedenavond

Do you speak English? Spreekt u Engels?

Goodbye: Dag/tot ziens

Thank you: Hartelijk dank/bedankt/dankjewel

See you later: Tot ziens/tot later

Public Holidays

New Year’s Day (Nieuwjaarsdag) 1 January

Good Friday* (Goede Vrijdag) Friday before Easter

Easter Sunday (Eerste Paasdag) Varies (March/April)

Easter Monday (Tweede Paasdag) Day after Easter Sunday

King’s Day (Koningsdag) 27 April (26 April if 27^th is a Sunday)

Liberation Day** (Bevrijdingsdag) 5 May

Ascension Day (Hemelvaartsdag) 39 days after Easter Sunday

Whit Sunday (Eerste Pinksterdag) 49 days after Easter Sunday

Whit Monday (Tweede Pinksterdag) 50 days after Easter Sunday

Christmas Day (Eerste Kerstdag) 25 December

2^nd Christmas Day (Tweede Kerstdag) 26 December

* Good Friday is not an official national public holiday, but employers might grant it as a day off

** Liberation Day (5 May) commemorates the end of German occupation in WWII and is only a mandatory day off every 5 years

Note: there is no Dutch law stipulating that certain public holidays are days off for employees. Therefore, there is no legal right to a day off on a public holiday. The collective labour agreement or employment contract will state whether an employee is entitled to time off on public holidays.

Investing in the Netherlands

The Netherlands offers a compelling combination of advantages that make it one of Europe's most attractive investment destinations. Its strategic location at the heart of Western Europe provides direct access to the European single market, serving as a gateway to over 450 million consumers. This geographical advantage is further reinforced by world-class infrastructure, with Schiphol Airport and the Port of Rotterdam ranking among the finest in Europe, ensuring seamless connectivity for businesses operating across the continent and beyond.

From a fiscal perspective, the Netherlands stands out for its extensive network of over 90 bilateral tax treaties, significantly reducing the tax burden on cross-border transactions. Investors also benefit from a highly favourable participation exemption, which provides a 100% exemption on qualifying dividends and capital gains, making the Netherlands a preferred jurisdiction for holding structures.

Beyond its financial and logistical merits, the country boasts a stable, transparent, and business-friendly legal system that provides investors with the certainty and predictability they need to operate with confidence. This is complemented by a highly educated, multilingual workforce, enabling companies to attract and retain top talent capable of operating in an international business environment.

The Netherlands Foreign Investment Agency (NFIA) is an agency of the Dutch central government, operating under the Ministry of Economic Affairs. The NFIA promotes and facilitates foreign direct investment into the Netherlands by assisting international companies seeking to establish or expand their presence. It provides advice on sectors, locations, incentives, and the regulatory environment, as well as facilitating introductions to relevant government bodies and business partners.

Registration and establishing an entity

The Netherlands offers several legal entity types, each with its own incorporation and registration process. The entity most commonly used for investment and business purposes in the Netherlands is the Besloten Vennootschap (BV), a Private Limited Company, for which a civil law notary must draft and execute a notarial deed of incorporation. Companies must be registered with the Kamer van Koophandel (KVK), the Dutch Chamber of Commerce and with the Belastingdienst, the Dutch Tax Authorities. Any individual holding more than 25% of the company’s shares, voting rights or control is considered an Ultimate Beneficial Owner (UBO). Under the Anti-Money Laundering Directive (AMLD) all legal entities must register their UBOs in the UBO Register maintained by the KVK.

Setting up of a legal structure

A company is not strictly required to have a Dutch legal entity to process a payroll in the Netherlands. However, under the Wet op de loonbelasting 1964 (Wage Tax Act) foreign entities that has employees working in the Netherlands might be required to:

• Register with the Dutch Tax Authorities as a withholding agent;
• Withhold and remit wage tax, national insurance contributions and/or employee insurance scheme contributions;
• Comply with Dutch payroll reporting obligations.

A foreign company without a Dutch legal entity can, and in some cases should, register directly with the Dutch Tax Authorities as a foreign employer. This involves applying for a wage tax number, filing periodic wage tax returns and paying wage tax and/or social security contributions on a monthly or four-weekly basis. If not obliged, this could also be done on a voluntary basis.

Foreign companies entering the Dutch market also could use an Employer of Record (EOR) to avoid the administrative burden of direct registration (at first).

Note: if a foreign company has employees working in the Netherlands, this may create a permanent establishment (vaste inrichting) for corporate income tax purposes, depending on the nature and duration of the activities. This could trigger vennootschapsbelasting (Vpb) obligations, even without a formal Dutch legal entity.

Banking

Salary payments must be made via bank transfer in the Netherlands, but a local Dutch bank account is not strictly required to pay salaries, wage taxes and social security contributions. Cross-border transfers within the Single Euro Payments Area (SEPA) are treated the same as domestic payments. The Belastingdienst accepts payments via SEPA bank transfers from any International Bank Account Number (IBAN) within the SEPA zone. For direct debit payments a Dutch/SEPA IBAN is necessary. Non-SEPA bank accounts are not recommended as they may incur higher transaction costs, longer processing times and currency conversion issues.

Working week

A fulltime standard working week in the Netherlands is from Monday to Friday. The standard is 40 hours, but for some sectors of industries fulltime translates to i.e. 36 or 38 hours per week. Office hours are commonly from 08:30 – 17:00 or 09:00 – 17:30 including 30 minutes lunch break. Overtime is usually compensated with additional pay or extra time off. According to the Arbeidstijdenwet (Working Hours Act) an employee aged 18 and above may work for a maximum of 12 hours per shift and a maximum of 60 hours per week. 

Employment law

Minimum wage in 2026

As of 1 January 2026, the statutory minimum wage is set at € 14.71 per hour for employees aged 21 and above. For employees under 21, lower rates apply. The minimum wage is indexed biannually (January and July) based on the development of contractual wages and published by the Ministry of Social Affairs and Employment. The minimum hourly wage applies regardless of the number of contracted hours per week.

Holiday allowance

A statutory holiday allowance of at least 8% of the gross annual base salary must be paid on top, typically in May of each year. The amount could also be paid out in (monthly) installments.

Holiday hours

Under the Civil Code, minimum statutory annual leave entitlement is 4 times the number of contractual working hours/days per week (e.g. a 5-day working week amounts to a minimum of 20 days per year (40 working hours x 4 = 160 hours, 160/8 hours per day).

These are minimum statutory entitlements. Applicable collective labour agreements and employer policies might provide for more. Statutory leave must be taken within 6 months after the end of the accrual year (i.e. by 1 July of the following year), or they expire. Contractual leave expires after 5 years.

Maternity and paternity leave

• Maternity leave may commence between 6 and 4 weeks before the expected delivery date;
• In the event of a late birth, the post-natal period is extended accordingly, guaranteeing at least 10 weeks of post-natal leave;
• The partner is entitled to a regular paternity leave of 5 days, and could take additional paternity leave up to 5 weeks within the first 6 months. This can be taken flexible;
• Benefit is claimed by the employer on behalf of the employee via the UWV.

Parental leave

Each parent is entitled to 26 times the number of contractual weekly working hours of parental leave per child. For an employee working 40 hours per week, this equates to 26 weeks of parental leave per child.

• Leave must be taken before the child turns 8 years old;
• Both parents are individually entitled; entitlement is per parent, and per child;
• Leave may be taken in full or flexible spread across multiple periods, subject to the employer's consent regarding scheduling.

Employees on parental leave are protected against dismissal during the period of leave. The employer may not terminate the employment contract on grounds related to the employee's exercise of parental leave rights.

Flexibility

• Parental leave may be taken part-time (e.g. reduced working hours spread over a longer period);

• The employee must notify the employer in writing at least 2 months in advance, specifying the duration, commencement date, and number of hours per week;
• The employer may, in exceptional circumstances, defer or modify the leave schedule, but cannot refuse parental leave altogether.

Since 2 August 2022, parental leave is partially paid:

The employer can claim a benefit via the UWV for (part) of the paid leave periods.

Sickness

Under the Civil Code, employers are required to continue paying at least 70% of the employee's wage during illness, for a maximum period of 2 years (104 weeks). The salary must be at least the statutory minimum wage. Many collective labour agreements, or company policies provide for higher sick pay (e.g. 100% in year 1 and 70% in year 2).

Obligations during sickness also include:

• Following a re-integration plan;
• Engaging an occupational health physician/company doctor;
• Compliance with the Gatekeeper Improvement Act.

Tax & Social Security

Tax year

The Dutch tax year runs from 1 January to 31 December.

Dutch personal income tax

Resident taxpayers are taxable on their worldwide income in the Netherlands. Non-residents are subject to tax only on income derived from specific sources in the Netherlands (mainly income from employment, directors’ fees, business income, and income from Dutch immovable property).

Rates

The Netherlands applies a progressive income tax system for income from employment. The rates below are for 2026 and include national insurance contributions (volksverzekeringen) where applicable. For more information on the insurances/social security we refer to the part under Dutch social security.

The rates apply to both residents and non-residents.

Tax Credits and Deductions

Employees are entitled to various tax credits, including:

• General tax credit (algemene heffingskorting);

• Labour tax credit (arbeidskorting);

• Income-dependent combination credit (inkomensafhankelijke combinatiekorting);

• Deductible items include mortgage interest, alimony payments, and specific healthcare costs.

Please note that each item has its own rules, thresholds, etc.

Dutch personal income tax return filing

In the Netherlands an individual is obliged to file a Dutch personal income tax return if invited, and if not invited, in case (additional) income tax is due. The regular filing deadline is the first of May following the concerning tax year. Individuals could request for an extension, normally until 1 September. Advisory companies have an extension ruling for 1 extra year.

Social Security

In the Netherlands social security is divided into two schemes, the national insurance scheme and the employee insurance scheme.

National Insurance Scheme (Premies Volksverzekeringen)

The national insurance scheme consists of:

• AOW (Algemene Ouderdomswet), state old age state pension insurance;
• ANW (Algemene nabestaandenwet), survivors dependant insurance;
• AKW (Algemene Kinderbijslag Wet), child benefits, and;
• WLZ (Wet langdurige zorg), long-term medical care insurance.

The national insurance contributions are owed by employees and usually levied through the payroll. The premiums are as follows:

Employee Insurance Scheme (Premies Werknemersverzekeringen)

The Employee Insurance scheme consists of the following insurances:

• WW (Werkloosheidswet), unemployment insurance;
• WAO (Wet op de arbeidsongeschiktheid), invalidity insurance (disability);
• WIA (Wet werk en inkomen naar arbeidsvermogen), work and income, capacity of work (disability);
• ZW (Ziektewet), sickness benefit (disability);

The employee insurance contributions are, despite the wording, owed by employer and payable to the Dutch tax authorities. Contributions are levied up to a maximum income of € 79,409 (for 2026). The average maximum annual contribution amounts approximately to € 9,400 for an employee with a permanent employment contract and € 14,000 for an employee with a temporary employment contract. The exact applicable rates would depend on either the type of contract, sector of industry and size of the company and as such the exact applicable amounts could differ per company and per employee.

ZVW (Zorgverzekeringswet), Health Insurance

Besides the above, part of Dutch social security is also the ZVW for health insurance. Under the Health Insurance Act employers must pay an income-related contribution (inkomensafhankelijke bijdrage Zvw) on behalf of employees, which is included in the employer's social security contributions payable via payroll, same as the employee insurance contributions. Employees are separately responsible for taking out their own private health insurance with a health insurance company.

Dutch payroll/wage tax

The Netherlands operates a wage tax withholding system. Companies who have their residence (or a permanent establishment) in the Netherlands and have employees working in the Netherlands are obliged to withhold and pay wage tax, and if applicable withhold and pay social security contributions. In the Netherlands, if both tax and social security apply, this will be processed in one filing and payment to the authorities.

Companies who do not have their residence in the Netherlands but do have employees that are taxable in the Netherlands for their employment income, can choose to register voluntarily as a withholding company for Dutch wage tax in the Netherlands. In case Dutch social security applies to these employees, there would however be a registration obligation for at least the employer contributions for social security, for which a payroll, Dutch filing and payment to the authorities is needed as well.

Dutch wage tax withholding companies are required to deduct and remit wage tax and/or national insurance contributions monthly from the employees' gross remuneration, in accordance with the Wet op de loonbelasting 1964 (Wage Tax Act 1964). Employers should also apply the general and labour tax credits in the payroll upon receipt of the employee's wage tax form (loonbelastingverklaring). The wage tax withheld acts as a pre levy to the employee's annual personal income tax liability as described before.

Employers file the monthly (or 4-weekly) wage tax return to the Dutch tax authorities and remit the payroll tax due. The deadline is typically within one month after the end of the relevant wage period, in accordance with the payment schedule issued by the Dutch tax authorities.

Payroll processing

Employees are usually paid monthly or every 4 weeks, resulting in 13 pay periods per year. The issuance of a payslip is mandatory under Dutch law (each time there is a change), containing:

• Gross wages;
• All deductions (wage tax, social insurance contributions, pension, etc.);
• Net wages;
• Accumulated holiday pay.

Payslips may be provided in digital format (paperless), provided the employee can access them.

Reports

Employers must retain payroll records for 7 years (fiscal retention obligation under and employee personnel files for 2 years after the end of employment (certain documents may require longer retention).

Hiring employees

The employer must, if (still) needed, register with the Dutch Tax Authority as a withholding company (including national insurance contributions if applicable and/or employer contributions for Dutch social security. If the no obligatory registration is needed for Dutch wage tax and/or national insurance contributions, the employer can register voluntarily.

Upon hiring a new employee, the employer must also:

• Register the employee for wage tax, which is processed via the payroll/filing submitted to the Dutch tax authorities;
• Where applicable, register the employee with the relevant mandatory (sector) pension fund in accordance with the applicable (collective labour) agreement.

Required employee documentation

The employer should collect and retain the following documentation:

• Completed and signed wage tax form, required to determine the applicable wage tax and to apply tax credits such as the general tax credit and the labour tax credit;
• Copy of a valid identity document (passport or EU/EEA identity card);
• BSN (Burgerservicenummer), citizen service number, tax and social security number);
• Copy of a valid residence and/or work permit, if applicable;
• Signed employment contract;

Without having the above on file, the employer must apply the anonymous rate for wage tax withholding, which is 52%.

BSN (Dutch tax and social security number)

A BSN is mandatory for all employees working in the Netherlands and must be recorded in the employer's payroll records (to be mentioned on the wage tax form as described above). The employee obtains the BSN through registration at the local municipality, or if not (fiscally) living in the Netherlands register in the Non-residents Records Database (RNI) in person at one of the 19 municipalities in the Netherlands with an RNI desk.

Extraterritorial costs and the expat-ruling

Under conditions actual costs (extraterritorial costs) incurred by employees who are hired or assigned from abroad may be reimbursed tax-free provided that these expenses can be proven. Costs that qualify as extraterritorial costs include, among others, costs related to double housing, language courses, residence permits, and home leave.

In case certain conditions are met, such employee working in the Netherlands may be granted the expat ruling. Based on this ruling, a tax-free reimbursement amounting up to 30% (27% as of January 1, 2027) of the income from active employment, up to a maximum income of € 262,000 (2026), can be provided to the employee for a maximum period of five years. Apart from the base of the expat ruling the employer can reimburse the school fees for an international school for the kids of employees tax-free in full. This tax-free reimbursement intends to cover all extraterritorial costs. If the expat ruling is applied, the actual extraterritorial costs cannot be reimbursed tax-free in addition.

There are conditions to be met to qualify for the expat ruling, which are:

• The foreign employee should have specific expertise that is not or scarcely available on the Dutch labour market. This is based upon a salary criteria. For 2026 the minimum annual (taxable) salary for the ruling is € 48,013, or € 36,497 if the employee is under 30 years old and has a Dutch qualifying master’s degree.
• The employee must have lived outside a 150-kilometre radius of the Dutch border during more than 2/3 of a 24-month period the start of the Dutch employment to qualify for the expat ruling.

An application, which is a joint filing by the employer and employee, for the expat ruling must be filed within four months after starting the Dutch employment. If this period is exceeded, the ruling, if granted, will only apply as of the month following the month in which the application was filed. The expat ruling may only be applied if the employee is included in a Dutch payroll. As such, a Dutch payroll is required.

Leavers

Upon termination of employment, the employer should:

• Pay any outstanding holiday allowance and accrued but untaken statutory leave, where applicable;
• Issue the final payslip at the time of the final payment;
• Issue the annual income statement for use by the employee for their personal income tax filing;
• Where applicable, and if separately needed, submit a deregistration notification to the relevant (sector) pension fund;
• Where applicable notify the IND in case of a permit.

Transition payment

Employers might be required to pay a transition payment (severance payment) to any employee whose employment is terminated by the employer.

Notice Periods

Statutory notice periods apply and are determined by the employee's length of service:

Notice periods may be extended by written agreement, but cannot be reduced below the statutory minimum.

Dismissal Procedure

Prior to terminating an employment by the employer, the employer must obtain permission from either:

• UWV, for dismissals on economic grounds (e.g. redundancy); or
• The cantonal court, for dismissals based on personal grounds (e.g. performance, conduct).

Unilateral dismissal without following the correct procedure is not permitted under Dutch employment law.

Unemployment benefits

Upon termination, the employee (not the employer) must apply for unemployment benefits directly with UWV. The employer is not required to submit a specific leaver notification to the unemployment agency; however, the employer's wage data submitted via the payroll tax return will be used by the UWV to assess the employee's entitlement to unemployment benefits.

Employee benefits

Work-cost regulation

In the Netherlands, the work-cost regulation (WCR) provides specific rules for reimbursement to employees. The general rule for wage tax purposes is that all reimbursements and benefits in kind provided to the employees are considered wages and are, in principle, taxable. For the purpose of wage tax, some items are, however, not considered a taxable benefit, which are:

• Small gifts provided by an employer to an employee are not considered a wage tax benefit in the following circumstances:
• The gift is provided for an occasion for which it is common for individuals (other than the employer) to offer a similar gift, such as a birthday present, or funeral wreath;
• It does not concern money or vouchers/gift cards;
• The benefit does not have an invoice value higher than € 25;
• Intermediate costs, costs that an employee does not incur for himself, but on behalf of the employer and for the employer’s account;
• Specific excluded items such as (but not limited to) a one-time jubilee allowance for employees (with a maximum of one monthly salary) for a service time of 25 or 40 years, one-time payment in the event of death (under circumstances).

Specific exemptions, nil valuations and low (fixed) amount valuations

Within the WCR an employer can reimburse certain expenses, provide benefits in kind, or make provisions for employees tax free if it concerns the so-called specific exemptions. These include (all under conditions) business travel expenses by public transport, travel expenses by own transport (max. € 0.23 per business km for 2026), course costs, study and training, meals during overtime and business travel, extraterritorial costs (e.g. expat ruling as described before), moving costs up to € 7,750 and the transfer of the household contents, costs of tools and ICT equipment, items related to health and safety regulations, costs for a certificate of good conduct, and products from the company’s own sector. For remote working days an allowance of € 2.45 per day (2026) can be granted tax free.

Nil valuations are benefits in kind that fall within the regulation, but are valued at nil. These are workplace-related facilities (such as coffee/tea at the office), which can nevertheless be provided wholly or partly untaxed.

Certain benefits in kind represent a fixed taxable amount, i.e. lunches (meals) at the office that have no business background, and are valuated at €4,05 (2026). These items are in principle taxed, but can also be included in the so-called tax-free space, which will be described in more detail below.

Free space

Reimbursements and benefits in kind that cannot be classified in one of the above, the employer might designate these, if usual, as final taxable income into the free space of the WCR, and as such provided free of tax. The free space is a percentage of the taxable wages of the complete staff. For the total taxable wages of the employees up to and including € 400,000 the free space percentage is 2%. Over the excess of the total taxable wage of € 400,000, the free space is 1.18%. The percentage changes annually, so it is important to check this each year in January. If the free space is exceeded, an 80% final tax levy has to be paid by the employer on the excess.

Company cars

Company cars are a common employee benefit in the Netherlands. However, private use of a company car triggers a benefit-in-kind taxation:

• Standard rate: 22% of the Dutch fiscal value added to taxable income;
• Electric vehicles: a lower rate of 18% on the first € 30,000 of the vehicle’s catalogue value and 22% on the amount above € 30,000 of the vehicle’s catalogue value.

Lease cars are still popular in the Netherlands, but the Dutch tax treatment has become less favourable for petrol and diesel vehicles.

Residency & work permits

Citizens of European Union/European Economic Area (EU/EEA) member states and Switzerland have the right to work freely in the Netherlands and do not require a work permit or residence permit.

Non-EU employees generally require a combined residence and work permit or a separate work permit.

Common categories

Applications are processed through the Immigration and Naturalisation Service (Immigratie- en Naturalisatiedienst, IND), or the UWV.