Guide to Global Payroll Management - 2020 - C-43

Payroll Tax Summaries for Selected Countries
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fines;

expatriation premiums; and

stock options (at the time they are unconditionally exercised).

Tax rates
Income taxes. Income tax rates on employment-based income (Box 1) are applied to
income ranges: 0% (for €0 - €20,711), 9.70% (€20,711 - €34,712), 37.35% (€34,712 - €68,507),
plus 49.50% (€68,507 and above).
"Specialist" expatriates (individuals who have specialized skills or knowledge not readily
available in the Dutch labor market) may apply for a tax free allowance of up to 30% of total
compensation (the "30% ruling") for a maximum period of 5 years (as of January 1, 2019). A
transitional period of two years (until January 1, 2021) applies for those who previously qualified for the 8-year period (prior to 2019). The allowance provides relief for additional costs
typically incurred by expatriates living abroad. The employee's level of education, relevant
job experience, and salary relative to the amount earned in employee's native country will
be considered. The application must be made within four months of beginning employment
in the Netherlands. Expatriates that utilize the "30% ruling" may not be reimbursed for actual
costs in addition to the tax free allowance; if actual costs are greater than 30% of total compensation, then the expatriate may be reimbursed the additional amount tax free.
Social security taxes: national insurance contributions. Employees pay contributions
to the national insurance programs (AOW - state pension; ANW - surviving dependents; and
AWBZ - exceptional medical expenses) of 27.65% of income up to €34,712 (maximum of
€9,598 annually).
Social security taxes: employed persons' insurance contributions. Only employers
contribute to social security programs for unemployment insurance (WW - Unemployment
Insurance Act), occupational disability (WAO - Invalidity Insurance Act and WIA - Work and
Income According to Work Capacity Act), and the financial effects of illness (ZW - Sickness
Benefits Act). Contribution rates vary by industry and are applied up to a maximum income
of €57,232, with an average contribution of €6,576 for an employee with a permanent
employment contract and €9,438 for an employee with a temporary employment contract.
Social security taxes: Income-dependent contribution pursuant to Health Care
Insurance Act (Zvw). Employees pay an annual contribution of €1,421 to the health care
insurer. An employer contribution of 6.7% on income up to €57,232 (for an annual maximum
of €3,835 per employee) is paid directly to the Tax and Customs Administration. The Ministry
of Social Affairs and Employment decides twice a year, on January 1 and July 1, whether to
adjust the rates.
When an employee is assigned to work in the Netherlands by a company located abroad,
the general rule is that the main foreign employer is liable to remit all applicable wage taxes
and social security contributions on behalf of the employee. However, the Dutch employer
to whom the employee was assigned can take over the withholding obligation, under certain
conditions. In situations where the employee is under two separate employment agreements, the main foreign employer must still register with the appropriate taxing authorities in
the Netherlands.

Relief from double taxes
The Netherlands has both an income tax treaty (see Appendix A, page A-55) and a totalization agreement (see Appendix B, page B-34) with the U.S.

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Guide to Global Payroll Management - 2020

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