The employer's social security contribution is 12.86% of the employee's salary. The social security breakdown for 2020 is:
*Government employers pay UFO instead of AWF – 0.78%.
The maximum annual salary cap for the employer contributions is €55,927 (2019).
Employee insurance contributions are capped at a max salary of €57,232 (2020), with the contribution rate depending on the employer's industry. On average, the yearly contribution, fully paid by the employer, is €6,576 for an employee on a permanent employment contract.
The employee insurance schemes are compulsory for every employee and consist of:
*Employers pay a low unemployment benefit (WW) contribution for employees with a fixed-term contract and a high unemployment benefit (WW) contribution for employees with a flexible contract.
Employers are required to contribute 6.70% (for 2020), capped at €57,232 a year of the employee's base salary towards the Healthcare Insurance Act (Zorgverzekeringswet). This contribution is calculated over the employee's base salary and then paid to the Dutch Tax Department. All allowances for medical and other insurance are taxable benefits.
When establishing whether an individual is considered a resident in the Netherlands, the following facts are looked at:
An expatriate is generally considered a resident of the Netherlands if:
Residents are taxed on their worldwide income. In some cases, the government treats nonresident individuals with Dutch income as limited national taxpayers, which entitles them to some tax credits.
Income is taxed at progressive rates.
|TAXABLE INCOME||TAX RATE|
|€0 - €20,384||9%|
|€20,385 - €34,817||10.45%|
|€34,817 - €68,507.00||38.1%|
If both spouses are resident taxpayers, they are taxed separately for their business income, employment income, pension income, and other periodic payments. Spouses and, under certain conditions, individuals living as a joint household automatically qualify as fiscal partners. This means that they can allocate their taxable income from a principal residence to either or both.
Also called Premiums Social Security, the National Insurance Premium applies to all residents in the Netherlands, regardless of their nationality. It covers old age, death, long-term disability, certain medical expenses and child benefits. The total premium for national insurance is 27.65%, which is divided in:
*The obligation to pay AOW contributions ends at the age of 67.
Contributions are levied on the income of up to €34,712 and the tax is capped at €9,598 per year. Employee national insurance contributions are not deductible from the taxable income.
All Dutch residents, as well as employees who are subject to Dutch wage tax, are covered by the Dutch Health Insurance Act (Zorgverzekeringswet). and need to have a statutory health insurance policy. The employee contribution is approximately €1,421, which includes the "own risk" payment of €385, all paid to the health insurance company annually.
For employees, the contribution consists of 5.45% of their salary, capped at €57,232 (2020).
Within an employment relationship, all benefits in kind are, in principle, considered as taxable income. Such benefits include accommodation allowances, private use of the company car, employee stock options, home-leave allowances, and pre and post-assignment bonuses. Employer-paid reimbursement of relocation costs relating to the acceptance of a new employment and employer contributions toward approved pension schemes are not taxable. Other refunds and benefits in kind also are not taxable, and the employer has an annual budget for tax-free reimbursements.
Certain expenses the employer covers, such as food, drink, and entertainment, are only partly deductible. The non-deductible amount is 0.4% of the employee's gross salary or no less than €4,600 per year. Alternatively, the employer can deduct 73.5% of the actual expenses.
Expats in the Netherlands are taxed only on 70% of their income to mitigate the higher cost of living in the Netherlands (if certain conditions are met). The tax regime can be granted for a maximum of 5 years, and the employer and employee must jointly request the application of the rule from the Dutch Tax Office. To qualify, the foreign employee must:
The primary purpose of the expat reimbursement is to cover all the extra costs someone moving to the Netherlands would experience. That makes those costs not tax-deductible unless they are higher than the 30% reimbursement.
Expats should apply for the 30% ruling within four months of starting their Dutch employment. If they miss that deadline, the ruling will not apply retroactively from the start of the job, but rather from the month following the application. The 30% ruling will be granted only if the employee is included in the Dutch wage tax administration.
When applying for the 30% ruling, the company needs to meet the following criteria:
The Dutch government offers employees who cycle to work a tax-free mileage allowance of €0.19 per km.
The government pays for part of the childcare costs to the employee as a way of encouraging parents to work full-time. The higher the income, the lower the contribution from the tax office will be.
Each family with at least one child under the age of 18, including adopted and stepchildren, can receive the AKW child allowance. The allowance is paid per quarter and is as follows:
In addition to the Dutch child allowance, there is an additional child benefit dependent on income for low salary households. Children that do not live at home because of sickness, handicap or to follow a study program may be eligible to request double family benefits.
Parents of children born inside the Netherlands will automatically receive a form, while expats with children born outside of the Netherlands should contact the SVB to request an application form and family allowance number.
The employer may reimburse expenses tax-free, up to a fixed percentage of the total fiscal wages of the employee (the work-related costs budget). The work-related costs budget is 1.7% for the first €400,000 of the total fiscal wages, and 1.2% for the remaining amount of the taxable wage bill. In case the work-related costs budget is exceeded, the employer needs to pay wage tax in the form of a final levy of 80% on the amount in excess of the budget.
Reimbursements of costs that do not form a (taxable) wage benefit for the employee, because they are directly related to the business of the employer. The reimbursement of these costs will not be included in the work-related costs budget. This also includes benefits and provisions that do not qualify as wage based on the wage tax law (Wet op de loonbelasting 1964), e.g. employers’ contributions to approved/qualifying employee pension plans.
Benefits or provisions, not included in the work-related cost scheme, that are obligatorily taxed on an employee level, such as the company car and taxable reimbursements.
The amount of a number of specific reimbursements or provisions will not fall within the work-related costs budget, e.g. travel expenses (up to EUR 0.19 per business kilometer with a private car), removal expenses, and extraterritorial expenses. Please note that the 30% ruling (expatriate tax regime) remains applicable for the reimbursements of extraterritorial expenses.
These reimbursements and provisions formally fall within the work-related costs budget, but are assessed to zero. Example include work clothing or refreshments at work. Zero valuations are applicable solely to wages in kind, usually in the form of provisions, and not to monetary reimbursements. These zero valuations avoid the situation in which provisions at the workplace would be debited from the discretionary scope and do not fill the work-related costs budget. Employers who provide this continue to be the owner.
The reimbursements or provisions that fall under the work-related costs budget. When an individual who is liable to paying tax in the Netherlands, but does not have an employer withholding it can deduct work-related costs on their Dutch PIT return.
Residents are entitled to claim deductions mainly relating to their personal or family circumstances, including maintenance payments to a former spouse.
Residents are entitled to claim deductions relating to charitable donations (deductions for certain expenses are capped or subject to thresholds).
Residents are entitled to claim deductions for educational expenses (deductions for certain costs are capped or subject to thresholds).
Dutch residents can claim deductions that relate to personal or family health circumstances. These include expenses related to sickness or disability, as well as expenses incurred during weekends, spend with disabled close relatives (deductions for certain costs are capped or subject to thresholds).
Mortgage interest repayments for financing, renovation, or maintenance of the primary residence may be deducted. The amount of the deduction is dependent on the employee's income. 0.60% (2020) of the value of the property is used to calculate the deduction. The rate for properties valued above €1.09 million is 2.35%.