Taxation on Wages in the Netherlands

Individuals working in the Netherlands are required to pay the wage tax. This is a tax applied to the income earned from employment, but it also comprises the contributions for social securities. These are computed together, however, the tax applies one time only

The Dutch wage tax, also known as the salary tax is part of the personal income tax and is levied at progressive rates. Below, our local consultants explain how the salaries tax is levied in the Netherlands. We can also assist with company formation services in the Netherlands.

Who is subject to the Dutch wage tax?

The Dutch salary tax applies to the following taxpayers in the Netherlands:

1.           Dutch citizens working in the country for a local private or public company;
2.           foreign citizens working in the Netherlands based on temporary or permanent work permits;
3.           foreign citizens not residing in the Netherlands but working for Dutch companies;
4.           company directors, who even if do not reside in the Netherlands, work for Dutch companies;
5.           foreign artists, sportsmen and other individuals who have performed an activity in the Netherlands.

It must be noted that the Dutch salary tax is also comprised in the double tax treaties signed by the authorities through special provisions. Our Dutch company formation consultants can offer more information on these agreements.

Salary tax rates in the Netherlands

As mentioned above, the wage tax in the Netherlands applies at progressive rates. These rates are:

• -          8.90% for an annual income below 20,142 euros;
• -          13.20% for an annual income between 20,142 euros and 33,994 euros;
• -          40.85% for an annual income ranging between 33,994 euros and 68,507 euros;
• -          51.95% for an annual income above 68,507 euros.

We remind Dutch citizens and residents that they are also entitled to various tax allowances, therefore these rates can decrease. Also, in order to have their salary taxes calculated employees must fill out Box 1 in the tax returns for the previous year.

The tax brackets change every year in the Netherlands, therefore asking for specialized assistance when filing tax returns is highly recommended. We can guide Dutch companies interested in purchasing accounting services, so do not hesitate to contact us.