Living in the Netherlands implies having various rights and duties, and among these are earning income from various sources, respectively paying the relevant taxes
for them. The country is one of the most prolific economies in the EU and has a low unemployment rate which means that most of the population makes its living from employment contracts.
Those who earn money under a labor contract are required to pay the salary tax in the Netherlands. This also applies to foreign citizens living here.
The taxes applied on salaries in the Netherlands
Employees perform their activities under labor contracts
in which the gross salary is written and from which various taxes are withheld by the employer. There are several levies imposed on employees’ incomes
, among which:
the income tax which is imposed on the gross amount earned by a person,
the payroll tax, which is also withheld from the employee’s salary,
the national insurance contribution to the Dutch pension fund,
the contribution to the unemployment fund which is also withheld from the salary.
These taxes are not entirely imposed on employees, as Dutch companies
must also contribute to the national insurance scheme.
The salary after the tax paid in the Netherlands is called the net salary.
It should also be noted that there are also various wage tax deductions in the Netherlands, which is why those who work here benefit from several allowances.
If you need information on how the salary tax in the Netherlands is calculated, our specialists can offer the necessary details.
Paying the salary tax in the Netherlands
In order to pay the salary tax in the Netherlands
, an employee is required to file an annual tax return under the Box System
. Based on the assessment made by the Dutch Tax Administration, the levy will be calculated.
Box 1 in the income declaration must be completed in order to find out the salary after the tax in the Netherlands is paid. Under the Dutch taxation system, income obtained by natural persons is calculated at different rates which depend on the amount of money made.
For 2020, these rates are:
- 36.65% for an annual gross income ranging between 0 and 20,711 euros,
- 38.10% for an annual gross income ranging from 20,712 euros to 68,507 euros,
- 51.75% for an annual gross income surpassing 68,508 euros,
- to these, the social security contributions of 27.65% apply.
Even if these rates seem high, one should know that the wage tax deduction in the Netherlands is very appealing for both Dutch residents and non-residents who work here.
An important thing to consider is that the salary tax in the Netherlands and its rates can suffer slight changes from year to year, which is why for updated information we recommend you consult our tax advisors.
The Dutch salary tax for foreign employees
The Dutch workforce
is made in an important percentage of foreign workers who will find plenty of benefits here. The salary tax
they need to pay in the Netherlands
applies only in the income these earn here. However, they are required to file tax returns both in the Netherlands and in their home countries in order to avoid double taxation.
The salary after the tax they pay in the Netherlands
is among the highest in the European Union
which is why it is very advantageous to work here as a foreign citizen.
The wage tax deduction in the Netherlands is also quite important in the case of foreign employees, as they are not the only one to benefit from it. Dutch employers can also take advantage from the 30% tax ruling, for example.
The Netherlands is an attractive country from a taxation point of view and if you need more information related to this aspect, our company registration officers can guide you.
Wage tax deductions in the Netherlands
As mentioned above, the salary tax in the Netherlands
is completed by several deductions
which are meant to make the entire personal income taxation system more attractive. Among these deductions are:
- the labor and general tax credit,
- the healthcare allowance,
- the rental allowance,
- the childcare and child budget allowances.
These are available for Dutch residents. Non-residents can also benefit from the qualifying non-resident taxpayer scheme.
For more information on the salary taxes in the Netherlands
, do not hesitate to contact our local specialists
. We can also support you in setting up a business here.