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Expatriates taking up employment in the Netherlands will be subject to comprehensive rules. The Global Mobility Services team at Grant Thornton Netherlands can help expatriates and their employers in dealing with Dutch visa and work permit requirements, tax matters, social security issues, pension and labour law.

In particular, the Global Mobility Services can assist expatriates and their employers in identifying Dutch tax planning opportunities and can assist with their global tax compliance.

Click on each of the areas below to expand for more information:

Facts and figures
Pre arrival procedures

The employers of non-EU nationals are usually required to apply for a work permit and a residence permit prior to the employee taking up employment in the Netherlands. Further, it is important that the expatriate’s employment contract and benefit package is structured in a tax-efficient manner before the start of the assignment.

Tax year

For individual taxpayers, the Dutch tax year is equal to the calendar year.

Tax returns and compliance

In the Netherlands there are various different tax forms (C/M/P) for individuals. Which one applies, depends on the personal situation of the individual.

Due dates and extensions

The tax year-end is 31 December. Personal income tax filing should be done before 1 May of the year following the tax year. However, when certain conditions are met, extension of the deadline up to one year is possible.

Income tax rates
Taxable Income (€) Rate (%) Cumulative tax
1 – 34,712 9.70 3,367
34,712 – 68,507 37.35 15,989
Over 68,507 49.50 >

Please keep in mind that additional social security contributions are to be paid.

Basis of taxation
Charge to tax

The taxation of individuals in the Netherlands is based on residency for income tax purposes. Residents of the Netherlands are taxable for their worldwide income. Non-residents are only taxable for certain types of Dutch sourced income. The most relevant ones are employment performed in the Netherlands and real estate located in the Netherlands.

Residence

Whether an individual can be considered a resident for Dutch tax purposes depends on the facts and circumstances. Important criteria are location of a permanent home, intention of the individual, registration in a municipal register and the individual’s economic and social ties with the Netherlands.

Income from employment

Wages earned while working in the Netherlands are in principle subject to Dutch wage withholding tax. The wage tax rates are similar to the Dutch income tax rates and the wage tax may be credited against Dutch income tax. Dutch wage withholding tax applies to all income from employment including weekly/monthly wages, annual salaries, bonuses, commissions, director’s fees, non-approved pensions and any other cash earnings or benefits in kind. A foreign employer is in principle not obliged to withhold tax on wages unless that employer has a so-called permanent establishment in the Netherlands. A foreign employer may also voluntarily apply to act as a Dutch wage withholding tax agent.

Stock options and equity-based compensation

In general stock options are taxed upon exercise. Stock options granted during the employment in the Netherlands and exercised after leaving the Netherlands can still be considered Dutch taxable wages.

A stock appreciation right (SAR) is essentially a cash bonus which in general is subject to taxation at the moment of pay-out.
In case an employee is granted or eligible to purchase company shares, this may also lead to taxable salary.

With regard to equity-based compensation, we recommend reviewing the terms and conditions of the plan prior to the introduction to determine the taxable moment and/or taxable treatment.

Source of employment

As mentioned above, where one performs labour in the Netherlands, any remuneration received in respect of these duties is treated as Dutch sourced income and is therefore subject to Dutch income tax regardless of the expatriate’s tax residence status (subject to the relevant double taxation treaty).

Benefits (in kind)

Most benefits in kind provided by an employer will be subject to Dutch wage or income tax. For example, the usage of a company car is considered taxable income in the Netherlands.

Expatriate concessions

Expatriates may be eligible for a special tax regime, the so-called 30% tax ruling. If all the relevant conditions are met, 30% of the gross remuneration may be paid out free of tax to the expatriate. The bottom-line effect is that the top tax rate is reduced from 49.50% to 34.65% (2020). In addition, several cost items may be reimbursed tax-free. Careful planning is recommended.

An expatriate who is eligible for the 30% tax ruling can opt to be treated as a partial non-resident taxpayer. As a result, the expatriate will be considered a non-resident for part of the income tax.

Relief from double taxation

The Netherlands has an extensive network of tax treaties with other countries.

Relief for foreign taxes

Relief to avoid double taxation may be claimed on the basis of tax treaties or the unilateral regulations, for expatriates who are Dutch tax residents. Residents are allowed either a tax exemption (with progression) or a tax credit.

Deductions from taxable income

In the Netherlands, an employee is not allowed to deduct any business expenses from his taxable income. On the other hand, an employer has numerous possibilities to reimburse business-related costs tax-free (see below 'Dutch labor cost regulation'). Therefore, the total salary package should be structured carefully.

Contributions to a non-Dutch pension plan borne by the employee are tax-deductible if the pension scheme qualifies for Dutch tax purposes (so-called 'corresponding approval').

The mortgage interest paid by the employee for the main residence can in principle be claimed in the Dutch individual income tax return. This also the case, within certain limits and criteria, with charitable and life insurance contributions and medical costs.

Finally, certain levy rebates may be applicable.

Other taxes
Capital gains tax

There is no capital gains tax in the Netherlands.

Principle residence

If you own a principle residence, you must add an amount to your taxable income in your Dutch individual income tax return: the owner-occupied home allowance (eigenwoningforfait). However, certain costs, including mortgage interest, are deductible.

If you sell your home, the surplus value (positive or negative) will result in the so-called owner-occupied home reserve. Do you have a positive owner-occupied home reserve? If so, the interest on the purchase of a new home is deductible over a maximum of the purchase price of your new home, minus the owner-occupied home reserve.

Inheritance, estate and gift taxes

A liability to Dutch inheritance and gift tax depends on the individual’s Dutch tax residence and domicile position.

Investment income

The Dutch tax residency rules will determine whether someone is subject to tax on savings and other investment income. Investment income is taxed at a flat tax rate of 30% if the income exceeds the exempted amount of € 30,846 (2020). The actual earnings on investments are not relevant for Dutch income tax. Instead, individuals are taxed on deemed income from investments, which depends on the total value of all assets and liabilities on January 1 of each year and is calculated as follows:

Bracket Taxable base income from savings and investments (€) Deemed income percentage: 0.06% Deemed income percentage: 5.33%
1 0 – 72,797 67% 33%
2 72,797 – 1,005,572 21% 79%
3 > 1,005,572 0%

100%

Local taxes

There are several local taxes such as council charges, asset tax, water board tax and sewage fees.

Real estate tax

The municipality levies a real estate (property) tax on owners of immovable property. The amount of tax depends on the value of the immovable property. The percentages may differ per municipality.

Social security contributions

Social security contributions include both national insurance contributions and employee insurance contributions.

Social Security 2020 - 'National Insurance Contributions'

Taxable income (€) employer employee
1 – 34,712 nil 27.65%
over 34,7120 nil nil

Social Security 2020 - 'Employee Insurance Contributions'

Earnings per year employer employee
Disability (WIA) 6.77% nil
Re-employment (Whk) 2.08% nil
Unemployment (WW) 7.94% nil
Health Insurance (Zvw) 6.70% nil
Child care 0.50% nil

The maximum premium income for the employee insurance contributions is capped at €57,232 for the year 2020.

Please do note that the employee insurance contributions are based on averages/estimates. The percentages for Whk premiums differ per industry and depend on the total annual fiscal wages of the employee.

Wealth tax

There is no wealth tax in the Netherlands.

Tax planning opportunities

Dutch Labor Cost Regulation
The Dutch labor cost regulation is mandatory and allows employers to provide their staff with tax free allowances and/or benefits in kind. For 2020 (the WKR budget) amounts to 1.7% over the first €400,000 of taxable wages and 1.2% of the taxable wages above €400,000. If the allowances and benefits exceed the WKR budget, the excess is considered taxable wages and is taxed at source at a rate of 80%, which is levied at the level of the employer or will be taxed otherwise.

There are several exceptions to this rule and employers and employees also need to meet several conditions when using the WKR budget. For instance, when the employer wants to provide staff with fixed allowances, those allowances need to be substantiated by conducting an investigation of the actual business costs before paying out those fixed allowances.

Noteworthy is that when an assignee working in the Netherlands receives employment income from a non-Dutch employer who does not have a Dutch wage tax withholding obligation, the employee may apply the WKR budget in the Dutch individual income tax return. However, any (fixed) allowances or benefits in kind received, should be treated as taxable income in such a case.

Stock Option Planning
Dutch stock option legislation has changed frequently the last years. Under the current legislation, stock options are in principle regarded as income from employment when the stock options are exercised. Previous stock option legislation and/or interim provisions might be applicable.

The tax approach of the Netherlands regarding cross-border stock option taxation is in line with the official OECD commentary, which means an allocation of the stock option benefits may be applicable.

Compensation package structuring
Tax planning and structuring of the remuneration package in a tax-efficient way is possible.

Earnings description Compensation structuring
Base salary Y
Bonus Y
Club membership N
Company car Y
Cost of living allowance Y
Education / schooling Y
Equity incentives Y
Foreign service premiums N
Housing Y
Home leave Y
Medical expenses Y
Moving expenses Y
Pension scheme / 401-K plan Y

Exemption from Netherlands’ Social Security
Apart from the EU regulation on social security, the Netherlands has concluded an extensive network of social security treaties with other countries. Based on these regulations and treaties, a foreign employee working in the Netherlands who has a Certificate of Coverage or an A1 (EU) may be exempt from making contributions to the Netherlands’ social security programmes. Careful planning is required

For further information on expatriate tax services in The Netherlands please contact:

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Niels Dekker
T +31 (0)88 676 9244
E niels.dekker@nl.gt.com

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Arthur Gude
T +31 (0)88 676 9190
E arthur.gude@nl.gt.com