Expatriate tax - The Netherlands

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.

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

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.

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.

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

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.

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.

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.

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.

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).

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.

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.

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

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.

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.

There is no capital gains tax in the Netherlands.

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.

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

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 32% if the income exceeds the exempted amount of EUR 57,000 (2023) / EUR 114,000 in case of joint income with a fiscal partner. 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:

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

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 include both national insurance contributions and employee insurance contributions.

Social Security 2023 - 'National Insurance Contributions'

Social Security 2020 - 'Employee Insurance Contributions'

The maximum premium income for the employee insurance contributions is capped at €66,952 for the year 2023.

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.

There is no wealth tax in the Netherlands.