Taxes in Europe Database v2
Act on wages tax, 1964 (Stb. 1964, 514) as last amended by the Bill of 23 December 2010 (Stb. 867).
-Individuals, resident and non-resident, who are in paid employment in the Netherlands.
-Individuals resident abroad who are in paid employment by a Dutch public body.
-Individuals resident abroad who are members of the board of management or the supervisory board of a company established in the Netherlands.
-Professional entertainers and professional sportsmen, irrespective of whether they are employed or not.
When determining wage withholding tax, the employer takes the following tax credits into account:
- the General Tax Credit (in the above table)
- the Earned Income Tax Credit (only for the working; dependent on income and age; for taxpayers younger than 58 years max EUR 1,574)
- the Tax Credit for Young Disabled (EUR 696)
- the Tax Credit for people older than 65 (in the above table; only for incomes not exceeding EUR 34,857)
- the Tax Credit for single people older than 65 (EUR 421)
- the Tax Credit for career-break savings scheme (At the time of unpaid leave under the scheme: EUR 201 for every year one has contributed to the scheme; for a description of the scheme see below)
The Tax on Wages is collected simultaneously with national social security contributions (volksverzekeringen). The above mentioned tax credits include a tax element and a social security contribution element. Taxpayers older than 65 no longer pay contributions for the State Pension (AOW). Therefore, their combined rate of tax and social security premiums is reduced by 17.9 %-point. The tax credits are reduced accordingly.
Employers may avail themselves of a reduction in tax and contributions for some specified groups of employees. In such a case employers may remit a lesser amount in wage tax and social security contributions. Lower remittances exist to stimulate professional education, research & development and shipping.
The rate structure described above applies to taxpayers under the age of 65 and consists of tax on wages and social security contributions.
- bracket 1: rate: 15.10 % (tax: 1.85 %; social security contributions: 13.25 %)
- bracket 2: rate: 24.05 % (tax: 10.80 %; social security contributions: 13.25 %)
- bracket 3: rate: 42.00 % (tax: 42.00 %; social security contributions: 00.00 %)
- bracket 4: rate: 52.00 % (tax: 52.00 %; social security contributions: 00.00 %)
The employer or entity that pays the wages, withholds the wage withholding tax and pays it periodically to the tax administration.
As from January 1, 2006, employers only have to file one combined tax return to the tax administration. The combined tax and social security contributions return comprises the wage tax/social security contributions return, the employees' social insurance contributions statement and the income-related Health Care premium statement. Employers and administration firms are furthermore under obligation to file the above returns and statements electronically.
Save-as-you-earn scheme (Spaarloonregeling)
Employees will only be permitted to take part in a save-as-you-earn scheme run by one employer. The maximum tax-free amount that an employee will be allowed to save in a year is € 613.
The following conditions apply to saving by means of save-as-you-earn in a year:
-An employee must have been employed by the employer since the first of January of that year.
-The employer must have been applying the general tax credit (algemene heffingskorting) to the employee since the first of January of that year.
-The employee does not contribute to a career-break savings scheme.
The final levy payable by the employer on save-as-you-earn savings is 25%.
Career-break savings scheme (Levensloopregeling)
Employees are legally entitled to participate in a career-break savings scheme of their employer or employers. By contributing to this scheme, employees can set aside an amount to finance a period of unpaid leave. Annually a maximum of 12% of the salary may be saved under this scheme but in total no more than 210% of the salary. This annual maximum of 12% of the salary does not apply to employees having reached the age of 51 on December 31, 2005 but not yet the age of 56. However, the 210% total maximum still applies to this category of employees.
During the period of building up the career-break savings scheme, the contribution is not subject to wage tax and social security contributions and the income-related Health Care Act premium. These become payable at the time of payment of the built up savings.
Employees' social insurance (werknemersverzekeringen) contributions are withheld from the career-break savings scheme contributions.
The employer is allowed to contribute to the career-break savings scheme provided he grants the same contribution to non-participating employees. Amounts paid to non participants are subject to normal taxation.
Each year the employee may chose to contribute to either the save-as-you-earn scheme or the career-break savings scheme. Participating in both schemes simultaneously is not possible.
The 30% facility for expatriates
Expatriates employed in the Netherlands on a temporary basis may in certain situations avail themselves of the 30% facility. This facility applies to employees coming from outside the Netherlands, who have been recruited by or seconded to a Dutch employer and who satisfy certain conditions. The facility allows the employer to grant a tax-free lump-sum allowance for the extra costs of the employee's stay in the Netherlands (extraterritorial costs). This lump-sum allowance amounts to a maximum of 30% of the sum of the wages and the allowance. If the actual costs are higher, they may be reimbursed free of tax.
The school fees paid for children to attend an international school may be reimbursed free of tax in addition to the lump-sum allowance for the extraterritorial costs.
Professional costs that cannot be designated as extraterritorial costs may also be reimbursed tax-free in accordance with the normal rules.
As the wage tax is an advanced payment on the personal income tax, the tax revenue, the tax revenue in percentage of BNP and the tax revenue in percentage of total tax as shown in the table below includes the amounts for Dutch Personal Income Tax.