Netherlands payroll and tax overview.

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.

Registrations and Establishing an Entity in 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 up to 6 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 Week

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.

Works Council in the Netherlands

If a company has over 50 employees, a works council is mandatory according to Dutch law. In the Netherlands a works council (ondernemingsraad (OR)) promotes and protects the interests of the employees in a company. The works council has rights, such as:

• the right to prior consultation in the event of major decisions and measures
• the right to prior consultation in the event of major investments
• the right of consent in the event of certain changes regarding terms of employment
• the right of consent concerning the appointment of prevention officers
• the right of consent concerning the place of employee data storage (i.e. payroll data)

The works council meets with the employer at least twice a year.

Basic Facts about the Netherlands

Full Name: The Kingdom of the Netherlands

Population: 17.28 million (Eurostat, 2019)

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

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. Nonresidents 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 working 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 €39.467 (in 2022) waged tax per annum. The 30% ruling is generally limited to a five-year period.

If an employee is younger than 30 and has a Dutch academic master's degree (or has obtained an equivalent title in another country). The employee then has a specific expertise if your salary, not including the tax-free allowance in the Netherlands, is more than € 30,001 in 2022.

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 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 fiscal salary (gross elements). 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.

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.

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.

Please do check section 6 on visa requirements for recommendations in case foreign employees leave the Netherlands.

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

Employers must provide a payslip to their employees, online payslips are legally acceptable but the employee must sign an agreement to agree on receiving the payslip digitally. It is not mandatory to make payments to employees and authorities from an in-country bank account.

It is mandatory to pay at least the net minimum wages into a bank account that is registered in the name of the employee. Cash payments are not allowed and are considered an economic crime.

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.