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Salary Taxes in the Netherlands

Updated on Friday 23rd July 2021

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Salary-Tax-NetherlandsLiving 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.
 
Below, our company formation agents in the Netherlands explain how the taxation of salaries occurs 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:
 
  1. the income tax which is imposed on the gross amount earned by a person,
  2. the payroll tax, which is also withheld from the employee’s salary,
  3. the national insurance contribution to the Dutch pension fund,
  4. 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.
 
We can also help you open a company in the Netherlands if you are an entrepreneur.
 

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.
 
We offer accounting services to those who need assistance in filing their Dutch tax returns.
 

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.
 

Filing tax returns as an employee in the Netherlands

 
Even if the salary tax in the Netherlands is withheld by the employer, so that a worker receives his or her net payment, one must still file tax returns under specific circumstances. Often, the local tax office will notify the taxpayer about this requirement.
 
Filing a tax return has the role of balancing certain taxes that need to be paid in advance, such as:
 
  • -  mortgages;
  • -  income obtained by one’s spouse or civil partner;
  • -  income obtained from other sources, such as savings;
  • -  costs related to healthcare and/or studies.
 
Even if the salary after tax in the Netherlands is considered the net amount, it is possible for credits and allowances to be granted after filing all required tax returns.
 
The Netherlands is a very advantageous country to live and work in, especially when compared to other EU countries, as it is incomparable when it comes to the wage tax deduction on can obtain, including as an expat.
 
As a non-resident who has lived and left the country in the span of a year, filing a tax return in the Netherlands can be beneficial, as you can obtain a tax refund for varied expenses.
 
If you were offered a job in the Netherlands and want to know more about the salary taxes you will pay, our specialists are at your disposal with detailed information.
 

The 30% tax ruling as a wage tax deduction in the Netherlands

 
Foreign citizens hired directly from abroad by Dutch companies can benefit from an extra salary tax deduction, called the 30% ruling. According to it, the gross taxable salary is reduced to 70% which means that the foreign employee will not pay any wage tax on 30% of the salary.
 
Recent changes in this rule imply for the foreign employee to have never worked before in the Netherlands and for the recruitment to be made by the Dutch employer directly in the worker’s home country. Even so, this one of the most important benefits when it comes to the salary obtained after tax in the Netherlands.
 
The salary tax in the Netherlands is not that high compared to other European countries, however, when considering all the deductions available, it is worth choosing this country over other similar ones from a taxation point of view.
 
We are here for you if you want to open a company a in the Netherlands, as our specialists can be in charge of the entire incorporation procedure.
 

The general tax credit applied to employment in the Netherlands

 
The general tax credit is one of the most important benefits applicable to local and foreign taxpayers in the Netherlands. Its main advantage is that it is applied on the amount of the tax paid. Its computation implies calculating the total income after which all qualifying tax deductions are applied. This means that when it comes to the salary after tax in the Netherlands, an employee can also obtain other deductions applied directly on the tax paid.
 
The general tax credit applies on the income tax levied earlier.  Apart from this, employees are also entitled to a labor tax credit.
 
The employment tax credit it computed and offered to the employee directly from the salary by the employer.
 
Another important aspect to consider that self-employed individuals can also benefit from the labor tax credit which is offered when one files the annual tax return.
 
As mentioned above, when it comes to wage tax deductions in the Netherlands, these are quite advantageous.
 

The main benefits employees can obtain in the Netherlands

 
Apart from their salaries, employees are also entitled to various benefits provided by their employers. Among these, accommodation is often offer to expat workers, company cars, stock options, relocation packages, bonuses. These are not included in the salary tax in the Netherlands, however, some of them can benefit from certain deductions. Among these, one of the best known is the accommodation and the home-leave allowances. It is also possible for Dutch companies to establish budgets for reimbursements of various employment expenses.
 
The Netherlands is one of the best countries to work in Europe when it comes to benefits offered to employees. We invite you to watch our video below:
 
 
 
 

Finding employment in the Netherlands

 
The Netherlands has unique business environment made of companies operating in all types of industries, hence the thriving employment opportunities. Expats can work in prolific sectors like IT, medicine, and trading.
 
One of the most important advantages is that the salary after tax in the Netherlands is quite high, so for those who remuneration is one of the main reasons to relocate will find this country meets all their expectations.
 
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.

 

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