Netherlands payroll and tax overview.

Your guide to doing business in the Netherlands

Doing Business in the Netherlands

The Netherlands lies on the north-western corner of continental Europe, on the shores of the North Sea, and shares land borders with Germany to the east, and Belgium to the south. With a thriving, developed economy (the sixth-largest in Europe), low unemployment, and a GDP of $44,400, the Netherlands has developed a prominent regional and global financial presence. A hub for commercial shipping and transport, the Netherlands is a strategic gateway to Europe and the rest of the world, and has a broad spectrum of international trading partners, including Germany, France, the UK, the United States, China, and Russia. Historically important industries in the Netherlands include fishing and agriculture, but more recently the country has become an important financial centre, with banking services, communications and IT, pharmaceuticals and energy production all growing in prominence in the 21st century. In 2017, Forbes ranked the Netherlands as the 7th best country in the world for business, while the World Bank ranked it 28 on its ‘Ease of Doing Business’ survey.

Why Invest in the Netherlands?

The Netherlands represents an attractive investment destination for a number of important reasons, including:

  • Economic Incentives: the Netherlands offers its business a competitive corporate tax rate of 20% on the first €200,000 - and 25% on taxable profits exceeding €200,000. Specific incentive programmes include the ‘Energy Investment Relief’ scheme for energy-efficient ventures, and international investment credits for businesses intending to export in large amounts.
  • Transport and Communication: The Netherlands has extensive, modernised road, rail, and communication networks, which connect businesses to to clients, locations and markets across Europe and the world. In Rotterdam, the Netherlands has the largest port in Europe, while Amsterdam Schiphol Airport serves millions of customers, and is the third-largest airport in the world by cargo-handling.
  • Skilled Workforce: Dutch employees are flexible, motivated and amongst the best-educated in the world. 90% of the Netherlands’ workforce is fluent in English, while the country’s education system is ranked third in the world.
  • Advantageous Location: The Netherlands occupies an advantageous business location, with a market of around 170 million consumers within 500 km, and 244 million within 1000 km. Amsterdam Schiphol airport and the port of Rotterdam connect the Netherlands to Europe and the world.
  • Research and Development: The Netherlands is home to numerous world-class research institutions, and its businesses benefit from a strong government focus on R&D. Strategic partnerships between government and industry have stimulated innovation in high-technology sectors like chemical and pharmaceutical production, ICT, and renewable energy.

Foreign Direct Investment in the Netherlands

The Dutch are global in their outlook and generally welcome opportunities for Foreign Cooperation. An Innovation Partnerships Grant Program exists with an aim to promote research and development, and to encourage businesses and public-sector knowledge institutes to study and launch national and international partnerships.

Registering a Company and Establishing an Entity in the Netherlands

A company is required to have a registration in place with the Dutch authorities (Companies House); however, a legal entity is not required to process payroll in the Netherlands.

It normally takes 2/3 weeks from the start of the registration process before the Wage Tax Number is issued by the authorities. Prior to obtaining a Wage Tax Number, the payroll can be processed; however, the wage tax can only be paid once the Wage Tax Number has been received. The Wage Tax Number is used when submitting payroll tax returns and for contact with the Dutch Tax and Customs Administration.

There are approximately 40 Dutch tax authority offices in the Netherlands and the representative office is allocated to a company based on the location of that company’s offices, operations, etc.

An agent or representative company is not required by law to be licensed to make any tax and/or social security fillings on behalf of their customer (the employer), however most tax advisors and agents in Holland are a member of a professional organisation.

Business Banking in the Netherland

Normal bank opening hours are 09:00 to 18:00 Monday to Friday, with some staying open later on Thursday or Friday evenings. Some banks are also open on Saturday mornings.

It is not mandatory to make payments to either employees or the authorities from an in-country bank account.

Working Days in the Netherlands

According to law, the maximum working time is 9 hours per day and 45 hours per week with the average working week being 40 hours. The working week is usually organised over five days, with a mandatory legal minimum of 1 day of rest, normally a Sunday.

Employees whose religion observes a day of rest on a day other than a Sunday, may opt for Friday or Saturday as the rest day.

Basic Facts about the Netherlands

General Information

The Netherlands lies at the western edge of continental Europe, on the eastern shores of the North Sea. Across the sea, the Netherlands shares a maritime border with the United Kingdom, while its mainland neighbours are Germany to the east, and Belgium to the south. The prehistoric Netherlands was home to a variety of Germanic, Saxon and Celtic tribes - but its people confederated in the 17th century, establishing a powerful, seafaring empire with colonies and settlements across the globe, and an economy based on export and trade. In the 21st century the Netherlands remains a prominent political presence on the world stage as a founding member of the EU, the OECD, and the WTO - while it also has a reputation for economic prosperity and high standards of living. The Netherlands is characteristically flat with large open plains and estuaries, and the country experiences a pleasant maritime climate of mild winters and summers. The Netherlands has a vibrant and diverse culture: its main cities, including Amsterdam, Rotterdam, and the Hague, are extremely popular holiday destinations, and attract millions of visitors each year.

Full Name: The Kingdom of the Netherlands

Population: 17.18 million (Eurostat, 2018)

Capital: Amsterdam

Primary Language: Dutch

Main Religion: Christianity

Monetary Unit: Euro

Main Exports: Transport and machinery equipment, agricultural products, mineral fuels and food

GNI per Capita: US $52,640 (World Bank, 2017)

Internet Domain: .nl

International Dialing Code: +31

 

Hello hallo

Good morning goedemorgen

Good evening goedenavond

Do you speak English? Spreek je Engels?

Good bye tot ziens

Thank you dank u

See you later Ik zie je later

 

Dates are usually written in the day, month and year sequence. For example, 1 July 2015 or 01/07/15.

Wage Tax & Social Security in the Netherlands

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

Under the current Income Tax Act, residents are liable for income tax on their world-wide income. Non-residents residing in an EU Member State or in a country with which the Netherlands has established a double taxation convention providing for the exchange of information may opt for enforcement of the sections of the Income Tax Act for residents. Non-residents are taxed only on the income from a limited number of sources in the Netherlands. Foreign diplomats and the staff of certain international institutions are exempt from Dutch income tax.

Wage Tax in the Netherlands

Wage tax is due to be paid to the authorities by the last day of the month following when the income was generated.

For example, wage tax due from January’s pay must be paid no later than Friday 28 February 2020.

Late filing and payment of income tax can attract penalties and interest payments.

30% Ruling

If an employee is recruited from abroad to work in the Netherlands, with a specific expertise that is scarce or absent in the job market in the Netherlands, he or she may be entitled to the 30% tax ruling. The ruling reduces the gross salary (the basis for wage tax and social security) to 70% on top of which a tax-free remuneration of 30% is paid via the payroll as a tax-free allowance intended to cover the higher expenses incurred by living in the Netherlands.

Both employee and employer must jointly request the application of the 30% rule from Dutch tax office. The employee will have to have significant and relevant work experience (considered scarce in the Netherlands), have higher education, be hired from abroad <150 km from the Dutch border and earn a salary of at least €38.347 waged tax per annum. The 30% ruling is generally limited to a five-year period.

Employees who plan to remain in the Netherlands long term and who are paying into the Dutch social security system should be advised that all the rights based on the gross salary such as pension and social security will decrease accordingly and be based on the 70% taxable portion.

The 30% allowance will have an impact in the tax-free reimbursement of extra territorial expenses and school fees as these are deemed to be included. For more information on the 30% ruling, please contact activpayroll.

Social Security in the Netherlands

In the Netherlands, social security is the public system that guarantees income and care in case of sickness, inability to work, unemployment, retirement and death. The Dutch social security system comprises a large number of schemes. These schemes can be classified into 3 groups: employee insurance schemes, general insurance schemes and social provisions.

All residents (employees, self-employed and individuals not in employment) are insured under National Insurance schemes covering old age, death, long-term invalidity, certain medical expenses and child benefit. In addition, employees are insured against illness, long-term invalidity and unemployment.

Social security premiums are collected via the payroll, the employee’s contribution will be deducted from the employee’s gross salary. The employer will pay the contributions for the employees as well as any employer’s portion to the various social security agencies. These payments are due to be paid to the authorities by the last day of the following month.

Pension Scheme

Each company can have its own pension scheme, this is sometimes mandatory under the collective labor agreement. The government pension is only the AOW which is paid through the wage tax.

Reporting Tax in the Netherlands

Monthly

The monthly tax return needs to be filed electronically on a monthly basis.

Yearly

There is no year-end filing which needs to be completed and sent to the authorities, however when there is a pension withholding, a pension overview will need to be issued to the pension provider.

New Employees in the Netherlands

All new employees are required to be registered at the local municipality for their BSN citizen service number, this must be completed within 3 days of the employee starting the company.

The details required to set up a new start are as follows:

  • Full Name
  • Address
  • Date Of Birth
  • Wage Tax Statement
  • Citizen Service Number (BSN)
  • Gender
  • Marital Status
  • Remuneration Information
  • Copy of a valid employee ID must be kept on record.

Expat new starts are required to provide the following documentation:

  • Passport
  • Signed Contract
  • Work Permit (If applicable)
  • Residency Permit (If applicable)

Please note:

  • All employees will need to be able to identify themselves at their place of work, with a legal photo ID (passport, driver’s license etc.).
  • There is no deadline for the registration requirements of an expat new start.

Leavers in the Netherlands

There is no reporting obligation on the employer’s side for leavers.

Final salary payments for leavers are due, on or before, the next pay date following the end of employment contract.

Payroll in the Netherlands

Employers must provide a payslip to their employees, online payslips are legally acceptable.

The information required for the implementation of the payroll, would be all relevant data such as personal details, gross salary and benefits and deductions for the employees. Regarding the employer; no additional information is required once the applicable company registrations have been performed.

Payroll reports and documents must be kept for at least seven years.

Payroll processes in the Netherlands may be handled in-house or may be outsourced to third-party Dutch payroll services for reasons of cost and efficiency - or simply to benefit from regional compliance expertise. International companies may wish to establish a global payroll solution to integrate the Netherlands into their wider network of operations.