Employment in the Netherlands - 2016

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Employment in the Netherlands
Conditions of employment, tax and social
security aspects
Edition 2016
Editor Hans van Ruiten
EmploymentintheNetherlandsEdition2016
16-01-EN-EIN
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20th edition

EMPLOYMENT IN THE NETHERLANDS
Conditions of employment, tax and social security aspects
Edition 2016
Editor
Hans van Ruiten

© Loyens & Loeff N.V. 2016
No reliance should be placed on nor should decisions be taken on the basis of the
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preparation of this brochure are not responsible for the results or any actions taken
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Loyens & Loeff.

16 loyens & loeff Employment in the Netherlands 2016
being carried out is responsible for ensuring that the regulations contained in the
WAV are complied with.
A work permit is not required for the following categories of persons:
• persons who have a residence permit for the purpose of becoming/being self-
employed. These persons must, however, actually be self-employed and apply
for a residence permit;
• persons who are allowed to stay in the Netherlands on the basis of community
law (i.e. nationals of EU/EEA-countries, including Switzerland, and their family
members). They only need a valid passport to carry out work here;
• persons who have a permanent residence permit;
• refugees;
• persons who have been exempted by means of an Order in Council. These
include: foreigners who only have come to the Netherlands to work for a very
short period of time, for instance to repair machinery, give lectures, install soft-
ware; and
• foreign nationals who have a residence permit, with an appendix, stating that the
foreign national is permitted to freely carry out work. This appendix is essential.
Croatian nationals hold a special position, as the Dutch Council of State (‘Raad van
State’) is yet to decide whether a work permit is still required for Croatian nationals.
Employees who have priority
Pursuant to the WAV, a work permit will be refused if there are employees on the
‘local’ labour market who can fill the position. This labour market comprises not only
the Netherlands, but the entire EU/EEA. Another requirement is that the position
must be advertised within the EU/EEA well in advance (at least five weeks before
the work permit is requested), in other words: before the employee is recruited from
abroad. This costs time and effort. These grounds for refusal do not apply in the case
of an intercompany transfer of specialised employees.
The validity of a work permit is limited to only one year. If the foreign employee needs
to continue his activities in the Netherlands after this period, the work permit applica-
tion process will have to start all over again.
Partners of intercompany transferred employees are free to work on the basis of
the work permit granted to their partners. Special conditions apply to intercompany
transfers.

17loyens & loeff Employment in the Netherlands 2016
1.4.3 Highly skilled migrant workers
Highly skilled migrant workers (‘knowledge migrants’) are employees (in other words,
not self-employed persons) whose income lies above a certain level and is in line
with the prevailing market salaries. The salary test is applied on a monthly basis.
This salary is set at € 4,240 gross per month, excluding holiday allowance and the
annual bonus (Thirteenth Salary), for those over the age of 30; for those under the
age of 30, it is € 3,108 gross per month, excluding holiday allowance and the annual
bonus (Thirteenth Salary).
After completing their studies in the Netherlands, foreign university graduates are
allowed to stay in the Netherlands for a period of one year to find employment as a
highly skilled migrant worker. The minimum income that is required in this situation
amounts to € 2,228 gross per month, excluding holiday allowance and the annual
bonus (Thirteenth Salary).
After this year, these employees must have either an employment contract or an
appointment as a civil servant.
One should keep in mind that the work activities of a knowledge migrant do not need
to be limited to one particular employer. However, the employer must always be able
to give above guarantee. This means that, if the migrant’s income were to fall below
this level – for instance because he decided to work part-time – then he would lose
his status as a knowledge migrant. The employer is required to report this and to
request a work permit for this employee.
Another example of knowledge migrants is those working on a Ph.D.; there is no
age or income limitation for them. Also postdoctoral or university professors under
the age of 30 are to be considered knowledge migrants, regardless of their income.
The following persons – inter alia – do not qualify as knowledge migrants: profes-
sional soccer players, clergymen, self-employed persons and students.
Duration of the residence permit for knowledge migrants
Knowledge migrants receive a five-year residence permit if they have an employ-
ment contract for an unlimited period of time. If they have an employment contract
for a limited period of time, the residence permit is granted for this same period, with
a maximum of five years. In these cases, the residence permit will not have to be
extended regularly, reducing the administrative burden.

2.3 Non-resident taxpayers 36
2.3.1 Income tax 36
2.3.1.1 Limited tax liability 36
2.3.1.2 Sources of taxable income 36
2.3.1.3 ‘Qualifying non-resident taxpayers’ regime as of 2015 38
2.3.1.4 Tax rates 38
2.3.1.5 Tax rebates 39
2.3.1.6 Partner rule 39
2.3.1.7 Tax treaties 39
2.3.2 Wage tax 40
2.3.2.1 Employment income 40
2.3.2.2 Expenses 42
2.3.2.3 Wage tax withholding obligations 42
2.3.3 Gift tax and inheritance tax 43
2.3.4 Real estate transfer tax 44
2.3.5 Real estate tax/other charges 44
2.3.6 Double taxation 44
2.4 The 30%-ruling 46
2.4.1 Introduction 46
2.4.2 The conditions for the 30%-ruling 46
2.4.3 Consequences of the 30%-ruling for wage tax purposes 48
2.4.4 The non-taxable 30%-allowance 49
2.4.4.1 Calculation of the 30%-allowance 49
2.4.5 Impact of the 30%-ruling on social security and pensionable base 49
2.4.6 Partial non-resident tax liability 49
2.4.7 Summary 50
2.5 General provisions 52
2.5.1 Social security/tax registration number (BSN) 52
2.5.2 Tax return, tax assessment, objection and appeal, preliminary
tax refund 52
2.5.3 Interest 53
2.5.4 Penalties 53
3 Social security 57
3.1 Introduction 57
3.2 National Insurance Schemes 57
3.2.1 General Old Age Pensions Act (‘AOW’) 57
3.2.2 Surviving Dependants Act (‘ANW’) 57
3.2.3 Long term care Act (‘WLZ’) 58
3.2.4 General Child Benefit Act (‘AKW’) 58
3.2.5 National Insurance Schemes – contributions 58

2.3.2.2 Expenses
Expenses incurred for the purpose of earning employment income – with some
exceptions – cannot be deducted on the individual’s income tax return.
Extraterritorial expenses/30%-ruling
An employer may compensate employees coming from abroad for extraterritorial
expenses. Under certain conditions, these employees may be entitled to the 30%-
ruling, which means they will receive a fixed tax-free allowance for extraterritorial
expenses. See 2.4. The tax treatment of expense allowances and benefits in kind
may be different under the 30%-ruling.
Employment cost regime
Specific legislation applies when it comes to the taxation of employee benefits,
referred to as the employment costs regime (‘werkkostenregeling’). All benefits
(whether in cash or in kind) are regarded as taxable wage, unless specific valua-
tion rules and exemptions apply. If the employer decides to pay the wage tax due
over the taxable benefits himself, he can make use of a tax-free employment costs
budget (‘vrije ruimte’) of 1.2% of the total taxable wages he pays his employees. To
the excess, an 80% employer tax applies.
2.3.2.3 Wage tax withholding obligations
In general, employers are required to deduct the wage tax and, if applicable, national
insurance contributions due over the employee’s employment income, and pay it to
the tax authorities on a monthly basis.
Only Dutch employers and non-Dutch employers with a permanent establishment
(e.g. an office or a branch), a permanent representative or a deemed permanent
establishment (see below) in the Netherlands, are required to withhold wage tax and
national insurance contributions. A non-Dutch employer may, under certain circum-
stances, register as a wage tax (and social national insurance contributions) with-
holding entity voluntarily. Please note that, if the employee is subject to the Dutch
social security schemes, non-Dutch employers do have the obligation to register as
a withholding entity for the payment of employer social security contributions, even
if they do not have a (deemed) permanent establishment or representative in the
Netherlands. Non-Dutch employers, who hire out employees to work for a principal
(either a third party or a group company) in the Netherlands, are considered to have
a ‘deemed permanent establishment’ in the Netherlands. This means that they must
register as a withholding entity for Dutch wage tax purposes and maintain a payroll
administration.

1 Conditions of employment
1.1 Introduction
Employment in the Netherlands, either through a secondment or direct employment
with a Dutch employer, will often have consequences in the field of employment law.
A secondment to the Netherlands can affect the terms and conditions of employment
as agreed to by the employer and the employee. The duration of the secondment
is an important factor. Often, the sending company has formulated a secondment
policy that clearly states what is considered to be a short secondment and what is
considered to be a long secondment (the latter being the true expat secondment).
This chapter deals with several of the terms and conditions of employment and a
number of other subjects that should be borne in mind by the employer and employee
in the case of a secondment to the Netherlands.
1.2 Applicable law
Usually, an employee and his employer have an employment contract that is
governed by the law of their home country. If the employee is seconded to work in
the Netherlands, this contract can remain governed by the law of the home country,
but will be partly governed by Dutch law. Certain rules of Dutch law will immediately
apply to the employment contract. As from the first day of secondment to the Nether-
lands, the Terms of Employment (Cross Border Work) Act (‘Wet Arbeidsvoorwaarden
Grensoverschrijdende Arbeid, WAGA’) applies to all foreign individuals who work in
the Netherlands. The WAGA is based on the EU Seconded Worker Directive of 1996,
but also applies to employees from non-EU countries. Pursuant to the WAGA, the
provisions of Dutch law relating to the topics mentioned below apply to the employ-
ment agreement of each individual who works in the Netherlands. The Dutch law
provisions indicated in the WAGA are considered minimum protection. Consequently,
these Dutch provisions will be superseded by provisions of the applicable law if the
latter are more favourable for the employee.
The WAGA refers to provisions on the topics below contained in Dutch legislation
and in Collective Labour Agreements, which have been declared generally binding
in the Netherlands.

MATRIMONIAL
PROPERTY LAW AND
INHERITANCE LAW
04

This is merely a rough representation of the rules. There are exceptions and there
is further fine-tuning.
A matrimonial property regime may change over time. Two examples:
• if two Dutch spouses (common citizenship, as a consequence of which Dutch law
is applicable) have been living in Spain for more than ten years then, according
to Dutch international private law, Spanish matrimonial property law becomes
applicable after ten years;
• if two British spouses have been living in the Netherlands for more than ten years,
Dutch matrimonial property law becomes applicable to them, according to Dutch
international private law.
4.2 Inheritance law
If a foreigner dies in the Netherlands, the question arises whether the inheritance law
of the Netherlands applies, or that of another country. Dutch international private law
provides the following answer (as a rule of thumb).
On 17 August 2015, a new European Union rule came into effect, making it easier for
citizens to handle the legal side of an international will and/or estate. If a citizen dies
in the Netherlands without having made a choice of law in his will, and his country of
habitual residence was the Netherlands, Dutch inheritance law is applicable to his or
her estate. When choosing an applicable law, a foreigner can only choose the laws
of his nationality. This choice of law should be made through a will.
In the Netherlands a will has to be signed at the notary (‘notaris’), who will draft a
notarial deed (will).
A choice of law before 17 August 2015 will be respected.
If a person dies, leaving behind a spouse and children, without making a choice of
law in a will, as a consequence of which Dutch law applies, the statutory distribution
of property will apply. The surviving spouse becomes the owner of the entire estate,
while the children receive a monetary claim on the surviving spouse amounting to
their portion of the inheritance. In principle, this claim will only be payable upon the
death of the surviving spouse.
A married couple may deviate from the above by means of a will. If a parent dis
inherits his or her child, in principle, this child may claim a sum of money that will
only be payable upon the death of the surviving spouse. Furthermore, due to the fact
that, in the Netherlands, as mentioned earlier, the community of property regime is

CONTACTS PRACTICE GROUP
employment tax and employment law
Amsterdam Attorney
Fred. Roeskestraat 100 Edith Franssen
1076 ED Amsterdam Petra van Straten
Tel. + 31 20 578 57 85 Klaas Wiersma
Fax + 31 20 578 58 00
Tax adviser
Kjeld Bekker
Samira Bentohami
Mia van Dijk
Ralph Ferouge
Gerwin Hoeksma
Maarten kleine Kalvenhaar
Aleid Langevoord

Arnhem Tax adviser
Utrechtseweg 165 Esther Jalink
6862 AJ Oosterbeek René Sueters
Tel. + 31 26 334 72 72
Fax + 31 26 333 73 42
Rotterdam Attorney
Blaak 31 Tosca van Halsema
3011 GA Rotterdam Ralph Leeuwrik
Tel. + 31 10 224 62 24
Fax + 31 10 412 58 39 Tax adviser
Frank Dekker
Bas Dieleman
Nico van Dijk
Rina Driece
Hans van Ruiten
Léonie Stooker
Wendy Terporten
Wies Verstraaten
Anja Wielowski
Charles Willigers

Authors
The authors who have contributed to this issue are:
Kees Bouwmeester
Frank Dekker
Nico van Dijk
Rina Driece
Edith Franssen
Pieternel Kouwenhoven
Léonie Stooker
Matthijs van Tol
Wies Verstraaten
all of whom work for Loyens & Loeff N.V.
Editor: Hans van Ruiten

Entry visa
In most cases, those who wish to obtain a residence permit must first request an
entry visa (‘MVV’). This does not apply to nationals of one of the European Union
Member States (including the European Economic Area and Switzerland), Monaco,
Vatican City, the United States of America, Canada, Australia, New Zealand, Japan,
and South Korea. Persons of all other nationalities must request an MVV. An MVV
is a special type of travel visa that is marked in the passport by means of a sticker.
It allows the holder of this passport to enter the Netherlands.
An MVV can only be obtained from the Dutch embassy or consulate in the country in
which the foreign national resides, or in the nearest country in which the Netherlands
has representation. Upon entering the Netherlands, the foreign national must apply
for a residence permit with one of the nine regional front offices of the Immigration
and Naturalisation Service (‘IND’) within three days. If he meets all requirements for
staying in the Netherlands, a residence permit will be granted.
If an MVV is required and a foreign national applies for a residence permit without
first having obtained one, his request will be rejected and he will have to leave the
Netherlands.
1.4.2 Work permit
Work permits are issued pursuant to the Foreign Nationals Employment Act (‘WAV’).
This act contains a number of restrictions regarding the right of foreign nationals to
work in the Netherlands. In principle, a work permit will only be issued if no employee
is available on the EU/EEA market to fill the position.
An employer may not employ a foreign employee to work in the Netherlands without
a work permit. For each employee who is working in the Netherlands without the
required permits, the employer will owe a fine of at least € 8,000 – regardless of
whether the employer acted in conflict with the law deliberately. Other companies
(economic employer(s)) may also be fined for the same amount, because they will
also be considered employers pursuant to the WAV. The main rule is that a work
permit must be requested for each foreign national who wishes to work in employ-
ment in the Netherlands. There are certain exceptions to this rule (see further on).
A work permit must also be obtained for part-time work, jobs aimed at obtaining
work experience, training on the job-positions and volunteer positions. Even if the
employee is recruited from another company, for instance an employment agency,
a work permit must still be requested. At the very least, it should be verified that the
employee has already been issued one. The principal for whom the work is actually

1.5 Legal residence wealthy foreigners
Wealthy foreign nationals can obtain a residence permit more easily. For a regu-
lar residence permit of one year, the individual must have a net wealth of at least
€ 1,250,000, which is invested into the Dutch economy. With respect to this type of
permit, strict regulations apply.
1.6 Registration with the municipal authorities
If a foreign national wishes to stay in the Netherlands for a period of more than four
months, he must register - in person - with the municipal authorities (‘BRP’) within
five days after arriving. To this purpose he must submit:
• a valid passport (this also applies to the spouse and children);
• a legalised copy of his birth certificate (this also applies to the spouse and
children);
• a legalised marriage certificate (if applicable);
• if either partner was previously married, a copy of the divorce decree.
Non-residents staying in the Netherlands for a period not exceeding four months also
have to register, but as non-residents (RNI).
1.7 Driving licence
As a rule, residents of the Netherlands are required to have a Dutch driving licence in
order to be allowed to drive a motor vehicle. There are, however, a number of excep-
tions to this rule. Holders of a valid driving licence issued in other countries in the
European Union (EU) or in the EFTA-countries Switzerland, Norway, Liechtenstein
and Iceland, are entitled to drive in the Netherlands on their non-Dutch driving licence
for ten years as of the date of issuance if this date of issue is prior to 19 January
2013, or 15 years if the licence was issued after 19 January 2013 (unless the validity
elapses at an earlier point in time).
Holders of a valid driving licence issued in countries outside the EU and EFTA or in
the former Netherlands Antilles or Aruba, who come to live in the Netherlands, are
allowed to drive a motor vehicle in the Netherlands on their national licence for a
maximum period of 185 days after entering the country. Before this period expires,
this person must either take a driving test in the Netherlands to get a Dutch driving
licence, or exchange his own non-Dutch licence for a Dutch one.

Special rules apply to employees (and their family members) to whom the 30%-ruling
(see section 2.4) has been granted, also if they come from countries outside the EU
or EFTA. If they can submit proof of the fact that the tax office has issued them the
30%-ruling, they can easily exchange their non-Dutch driving licence for a Dutch one.

2 Taxation
2.1 Residence
For Dutch tax purposes, it is essential to know whether an individual who is working
in the Netherlands is considered a tax resident of the Netherlands or not. If so, he
is considered a resident taxpayer; if not, he is considered a non-resident taxpayer.
A non-resident taxpayer may be regarded as a resident taxpayer. An employee
benefiting from the 30%-ruling can choose the status of partial non-resident taxpayer.
Dutch residency is determined on the basis of facts and circumstances. The existence
of a long-term relationship of a personal nature with the Netherlands is regarded as
a very important factor. Dutch case law shows that the following circumstances are,
amongst others, relevant in this regard:
• the place where he has his home;
• the place where his family (partner) resides;
• the duration of his stay in the Netherlands;
• other personal ties with the Netherlands, such as (club) memberships, bank
accounts, etc.
Any individual from abroad who is working in the Netherlands can, for tax purposes,
be considered a resident of more than one country. This may result in double taxa-
tion. However, most tax treaties that have been concluded between the Netherlands
and other countries provide a solution for this.
The regulations that apply to resident taxpayers differ substantially from those that
apply to non-resident taxpayers. We have therefore chosen to discuss the two situ-
ations separately. Individuals who are resident taxpayers should refer to section 2.2.
Section 2.3 is relevant to those who are non-resident taxpayers. In section 2.4, the
specific situation of employees who benefit from the 30%-ruling and who choose to
be treated as partial non-resident taxpayer is explained.

2.2 Resident taxpayers
This section applies to individuals who are resident taxpayers (see section 2.1) and
partly (for income in Box 1 only) to partial non-resident taxpayers (see section 2.4).
2.2.1 Income tax
Resident taxpayers owe income tax on their worldwide personal income irrespec-
tive of where it is earned or paid. The Dutch tax year runs from 1 January through
31 December. Income is taxed in three separate Boxes:
• Box 1: income from work and home;
• Box 2: income from substantial shareholding; and
• Box 3: income from savings and investments.
2.2.1.1 Box 1: Income from work and home
The income from work and home, taxable in Box 1, includes:
• employment income, pensions, social security benefits, etc.;
• business profits (for entrepreneurs);
• income from work that is not considered salary or business profit (e.g. free-lance
activities, extra earnings, etc.); special rules apply to this type of income;
• income and capital gains from so-called lucrative interests, i.e. from certain finan-
cial instruments used as an employee incentive (e.g. carried interest, ‘sweet
equity’ and non-recourse loans);
• negative income for income provisions (e.g. refund of previously deducted life
insurance premiums);
• periodic payments such as alimony and certain State benefits; child alimony is
not taxable;
• deemed rental income in connection with a privately owned principal residence
in the Netherlands.
Deductible expenses:
• expenses for commuting by public transport;
• interest and other costs related to mortgage loan(s) and ground rent paid for long
lease, under strict conditions;
• expenses for ‘income provisions’, e.g. annuity premiums;
• alimony or maintenance expenses paid to a former spouse or partner;
• particular expenses for medical care;
• weekend expenses for severely handicapped persons over the age of 21;
• educational expenses;
• expenses in connection with a building listed as a Monument;
• donations to qualifying charitable institutions.
Some of the deductible items are income-related.

Employment income
Employment income (worldwide) consists of employment income and certain other
kinds of benefits, including pension benefits. Employment income is discussed in
more detail in section 2.2.2.1. Employment-related expenses are not deductible,
except, under conditions, commuting expenses if the employee travels by public
transport, and these expenses are not reimbursed by the employer.
Income from other activities
Specific regulations apply to income generated from other (free-lance) activities, not
being employment income or business profits, and to income generated by practising
an independent profession. In order to qualify, the person concerned must satisfy
certain criteria. If these criteria are not met, the income will generally be taxed as
employment income.
If he wishes to enjoy certain employee benefits, a freelancer can, under certain
conditions, elect to be treated as an employee (‘opting-in’).
Dutch real estate
If a taxpayer owns a house in the Netherlands that is to be considered his principal
place of residence, the taxable income attributable to this home ownership is set at
0.75%1
of the official value of the house, as determined by the municipality (referred
to as the ‘WOZ-value’), up to a WOZ-value of € 1,050,000.
For houses that have a WOZ-value that exceeds € 1,050,000, the deemed rental
value will be € 7,875 plus 2.35% of the value of the house in as far as this exceeds
€ 1,050,000.
In view of this fixed income, the costs of home ownership (except for mortgage costs
and ground rent) are not tax-deductible.
Since mortgage interest paid is deductible (during a maximum period of 30 years) if
the house is used as the principal place of residence, home ownership will generally
be a negative source of income. Strict regulations apply as to the type of mortgage
loans that can newly be taken out, if the homeowner wishes to deduct the related
mortgage interest. An essential condition is that scheduled annuity repayments are
made on the loan.
A second residence or other owned real estate, rented out or not, is taxed in Box 3
(see 2.2.1.3).
Please note that if one rents out or sells his principal place of residence in the
Netherlands and purchases a new residence, additional regulations (‘bijleenregeling’)
may apply, which may reduce the amount of mortgage interest the homeowner can
deduct.
1 For houses having a WOZ-value not exceeding € 75,000, the applicable percentage ranges from
0% to 0.60%

2.2.1.2 Box 2: Income from substantial shareholding
If an individual, together with his fiscal partner, owns at least (directly or indirectly) 5%
of the shares or of any class of shares in a company, the income is taxed in Box 2.
Certain expenses can be deducted. Also, the balance of certain personal deductions
(not deducted in Boxes 1 or 3) can be deducted in Box 2.
Although the main rule is that capital gains are tax-exempt and that capital losses
are not deductible, an exception applies to capital gains on shares that qualify as a
substantial interest for tax purposes. In that case, capital gains are taxed and capital
losses can be deducted in Box 2.
2.2.1.3 Box 3: Income from savings and investments
The value of almost all worldwide assets of an individual minus most of a person’s
debts and liabilities per 1 January of the tax year, form the basis for calculating a
fixed notional income of 4% in Box 3. Personal allowances may reduce this taxable
basis. The investment income actually realised (such as interest, dividends or rental
income) is not taxed.
2.2.1.4 Partner rule
Married persons and persons officially registered as partners are automatically
considered partners for tax purposes. Other unmarried individuals will only qualify
as partners if they are registered at the same address and have either:
• a notarial cohabitation contract;
• a joint child;
• a joint privately owned principal residence or;
• a joint pension plan.
Being partners, two persons can allocate certain income and deductible items among
themselves, for the purpose of achieving optimal tax benefit. The same applies to
taxable assets and deductible debts and liabilities in Box 3 (see 2.2.1.3).
2.2.1.5 Tax rates
The total income tax liability is the sum of the income tax calculated over the taxable
income in the three Boxes.
Income tax is levied together with the national insurance contributions. The amount
of national insurance contributions due is calculated over the first two tax brackets in
Box 1 (see also 3.2.5.). Subsequently, the applicable tax rebates are applied to the
total amount of income tax and − if applicable − national insurance contributions due.

2016
Box 1 (under 65)2
Taxable income
exceeding
up to tax
in %
national
insurance
in %
total
in %
0 19,922 8.40 28.15 36.55
19,922 33,715 12.25 28.15 40.40
33,715 66,421 40.40 40.40
66.421 52.00 52.00
Box 2
The tax rate applicable to income taxed in Box 2 is 25%.
Box 3
Income in Box 3 is taxed at a flat rate of 30%.
Certain tax-exempt amounts in Box 3 are available under specific conditions.
Debts are largely deductible
2.2.1.6 Tax rebates
Each individual who is a resident of the Netherlands and/or is subject to the social
security schemes of the Netherlands, has a right to specific rebates on the income
tax/national insurance contributions due, depending on his personal circumstances.
2.2.2 Wage tax
In the Netherlands, an employer has the obligation to withhold wage tax (and social
security contributions, if applicable) from the employment income he pays his
employees (see 2.2.2.3). This deduction is an advance tax to be credited against
the personal income tax eventually due. The tax is calculated over the same brackets
and the same rates apply.
2.2.2.1 Employment income
The term employment income is defined very broadly and comprises cash benefits,
benefits in kind and also entitlements.
Income in cash
Besides regular employment income, cash benefits can also include expat allow-
ances, commissions, bonuses, etc.
2 Other rates and/or brackets apply as of pensionable age for state pension purposes.

Income in kind
Benefits in kind include the private use of a company car, free housing, free meals,
free travel, shares, goods, etc. There are general and specific rules for determining
the taxable amount of benefits in kind.
The private use of a company car is subject to taxation. The annual benefit is
basically 25%3
of the official Dutch list price of the car. If the employee can prove
that the private mileage does not exceed 500 kilometres per full calendar year,
the taxable benefit in that year will be nil (commuting qualifies as business travel).
A statement confirming this can be requested from the tax authorities. It is neces-
sary to maintain a detailed kilometre registration and to hold on to all supporting
documents.
Entitlements
The third category, entitlements, includes conditional rights to receive one or more
future benefits in cash or in kind. Taxation of most entitlements is deferred to the time
the benefits are received. Examples of such entitlements are pension rights and the
right to benefits under one of the employee insurance schemes (see 3.3).
Pension schemes
The term ‘pension’ is strictly defined for tax purposes. It does not refer to the
General Old Age Pension based on the State social security system (‘AOW’).
A pension scheme that complies with the pension definition as provided in the law is
called a ‘qualifying pension scheme’. If the pension scheme qualifies, the employee’s
contributions are tax-deductible and the employer’s contributions are tax-exempt.
The benefits are subject to taxation at the time of payment. As from 1 January 2015,
it is no longer possible to accrue pension rights tax-efficiently over annual income
exceeding € 101,519. In addition, the yearly accrual rate is subject to a decrease
as from that date.
Participation in a non-Dutch pension scheme requires particular attention, as these
schemes cannot be treated as a qualifying pension scheme without approval from
the tax authorities. If a pension scheme does not qualify for Dutch tax purposes, the
employee’s contributions are not tax-deductible and the employer’s contributions
constitute taxable income for the employee. Aforementioned approval is subject to
various conditions and is obtained upon request. Whether or not such approval
is advisable, depends on the situation. The changes, which came into effect on
1 January 2015, do not apply to pension schemes from other EU Member States.
3 The benefit is calculated at 4%, 15% or 21% of the official Dutch list price of the car for environ-
mental-friendly cars with zero or low CO2-emission.

Employees who have participated in a Dutch pension scheme during their stay
in the Netherlands, will – upon emigration – receive a protective tax assessment
(‘conserverende aanslag’) for the total value of either the pension rights accrued or
the total of the tax-facilitated contributions paid during the period of employment in
the Netherlands. If certain conditions are met, the income tax will not actually be due.
A protective tax assessment is nullified after ten years, upon request.
Employees seconded to the Netherlands who continue to accrue pension rights
under an approved non-Dutch pension scheme (i.e. with a non-Dutch pension fund
or insurance company) will receive a protective tax assessment for the total value
of either the pension rights accrued or the total of the tax-facilitated contributions
paid during the period of employment in the Netherlands – a final assessment being
imposed upon emigration. In principle, the annual increase of these pension rights
is subject to taxation. However, if certain conditions are met, the income tax will not
actually be due. If, at any time, the non-Dutch pension scheme no longer qualifies,
for example due to lump sum payments, the income tax due will have to be paid.
A protective tax assessment is nullified after ten years, upon request.
2.2.2.2 Expenses
Expenses incurred for the purpose of earning employment income – with some
exceptions – cannot be deducted on the individual’s income tax return.
Extraterritorial expenses/30%-ruling
An employer may compensate employees coming from abroad for extraterritorial
expenses (see section 2.4). Under certain conditions, these employees may be
entitled to the 30%-ruling, which means they will receive a fixed tax-free allowance
for extraterritorial expenses. The tax treatment of expense allowances and benefits
in kind may be different under the 30%-ruling.
Employment costs regime
Specific legislation applies when it comes to taxation of employee benefits, referred
to as the employment costs regime (‘werkkostenregeling’). All benefits (whether in
cash or in kind) are regarded as taxable wage, unless specific valuation rules and
exemptions apply. If the employer decides to pay the wage tax due over the taxable
benefits himself, he can make use of a tax-free employment costs budget (‘vrije
ruimte’) of 1.2% of the total taxable wages he pays his employees. To the excess,
an 80% employer tax applies. Under circumstances, it may be more beneficial to tax
the excess taxable benefit on an individual basis (e.g. when the 30%-ruling applies).

2.2.2.3 Wage tax withholding obligations
In general, employers are required to deduct the wage tax and, if applicable, social
security contributions due over the employee’s employment income and pay it to the
tax authorities on a monthly basis.
Only Dutch employers and non-Dutch employers with a permanent establishment
(e.g. an office or a branch), a permanent representative or a deemed permanent
establishment (see below) in the Netherlands, are required to withhold wage tax and/
or national insurance contributions. A non-Dutch employer may, under certain
circumstances, register as a wage tax (and national insurance contributions) with-
holding entity voluntarily. Please note that, if the employee is subject to the Dutch
social security schemes, non-Dutch employers have the obligation to register as a
withholding entity for the payment of employer social security contributions, even if
they do not have a (deemed) permanent establishment or representative in the
Netherlands. Non-Dutch employers, who hire out employees to work in the Nether-
lands for a principal (either a third party or a group company), are considered to have
a ‘deemed permanent establishment’ in the Netherlands. This means that they must
register as a withholding entity for Dutch wage tax (and if applicable: national
insurance) purposes and maintain a payroll administration.
A Dutch group company may take over the withholding obligations of the non-Dutch
employer after having obtained prior formal approval from the Dutch tax authorities.
If an employee is employed by a non-Dutch employer who does not have a
permanent establishment, a deemed permanent establishment or a permanent
representative in the Netherlands and the employer is not voluntarily registered to
withhold wage tax, then there is no wage tax withholding liability for the employer;
consequently, the employee will have to file an annual income tax return to report his
income, and pay income tax upon assessment.
A proposal has been made to abolish the current Declaration of Independent
Contractor Status (‘VAR-verklaring’), which provides clarity on the fiscal qualification
of the relationship between companies and independent contractors, as of
1 April 2016 and to replace it by a (voluntary) approval procedure.
Companies can submit an agreement with the tax authorities, requesting the authori-
ties to formally approve the fact that the relationship between parties is an employment
relationship and that consequently no wage tax withholding obligations apply.
2.2.3 Gift tax, inheritance tax and transfer tax
Those who receive a (real or fictitious) gift from a (real or deemed) resident of the
Netherlands, owe gift tax (‘schenkbelasting’). Those who receive a (real or fictitious)

inheritance from someone who was a (real or deemed) resident of the Netherlands
at the time of death, owe inheritance tax (‘erfbelasting’). The place of residence of
the receiver/heir (or person who is deemed to have received something pursuant
to inheritance tax law) is not relevant. These rules also apply to expats who make a
gift or pass away while living in the Netherlands, even if they – within the context of
the 30%-ruling – opted to be treated as a partial non-resident taxpayer for income
tax purposes (see 2.4.6). The tax is levied on the market value of the gift or inheri-
tance and is levied at a progressive rate, depending on the value of the gift and the
relation between the receiver and the giver/deceased, taking into account the appli-
cable exemptions. Acquisitions by children from their parents are taxed at a rate that
ranges between 10% and 20%. A gift or inheritance received from a non-related
person is taxed at a rate that ranges between 30% and 40%.
Someone who lived in the Netherlands, but has moved elsewhere and makes a gift
within a year after leaving the country, is considered to be a Dutch resident at that
the time of gifting for gift tax purposes – regardless of his or her nationality.
A similar rule applies to those who have Dutch nationality, have left the country and
who make a gift or leave an inheritance: if this takes place within ten years after
leaving the country, they are considered Dutch residents at the time of giving/death.
In the case of a Dutch person who emigrated to Switzerland and died before the ten
years elapsed, the European Court of Justice ruled on 23 February 2006, that the
fiction of residence in the Netherlands was not in conflict with the free movement
of capital, as provided in the EC Treaty. Also in the case of a Dutch person who
emigrated to Belgium and who died before the ten years had elapsed, the Dutch
Supreme Court ruled on 22 December 2006, that the fiction was not in conflict with
European law.
It is, of course, possible that – in the case of an inheritance or gift – inheritance tax
or gift tax (or a similar tax) is due in another country as well. The Netherlands has
entered into a treaty for the purpose of avoiding double taxation in this area with a
limited number of countries. If there is no applicable treaty, the Netherlands in some
situations will show some leniency based on the Decree on the Avoidance of Double
Taxation 2001.
2.2.4 Real estate transfer tax
In the case of a transfer of real estate (or certain rights regarding such property)
located in the Netherlands, the transferee is subject to tax on this transfer. The tax is
charged over the value of the property at a rate of 2% for houses. Other real estate
is taxed at a rate of 6%.

2.2.5 Import duties, VAT and excise duties
If personal property is transferred to the Netherlands because of a change of
domicile, import duties and VAT may be due, while some items may also be subject
to excise duties. A distinction should be made between personal property trans-
ferred from a country outside the EU and personal property transferred from another
Member State of the EU. If this property is transferred from a country outside the EU
in connection with the change of domicile, it is possible – under certain conditions –
to obtain an exemption from taxation.
In general, the customs authorities will want to see proof of importation of the per-
sonal belongings. This means a lot of paperwork. A short list of the extra documents
required:
• employment contract;
• declaration from employer (on the duration of the stay in the Netherlands);
• rental or purchase contract of the home;
• proof of registration in the new hometown;
• proof of end of registration in the former hometown;
• copy of passport(s);
• signed inventory lists (two copies).
2.2.5.1 Moving from outside the EU to the Netherlands
As mentioned above, if an employee transfers his principal place of residence from
a country outside the EU to the Netherlands, the importation of his personal property
is subject to import duties, VAT and possibly excise duties4
. In order to obtain afore-
mentioned exemption from taxation, the employee must apply for an authorisation
(licence) from the Dutch customs department. The relocation company (international
remover) can generally take care of this, as well as of the other customs paperwork.
The exemption applies both to household goods and to other personal property,
under the following conditions:
a. the employee must have lived abroad for at least 12 consecutive months;
b. the employee must have owned and used (in the case of non-consumer
goods) the goods abroad for at least six months prior to bringing them into the
Netherlands. This has to be clearly demonstrated;
c. the employee must declare the personal property with the customs department
within 12 months after the actual transfer of domicile;
d. the employee is not permitted to sell, lease, lend or otherwise transfer the goods
within 12 months after bringing the goods into free circulation in the EU.
4 No exemption can be obtained for alcoholic products, tobacco or tobacco products and articles
for professional purposes.

In particular situations or circumstances (force majeure), the customs department
can be requested to set aside these rules and conditions.
2.2.5.2 Moving from another EU Member State to the Netherlands
The internal frontiers between the EU Member States have been abolished and
individuals can transfer their personal property from another EU Member State to
the Netherlands without fulfilling any customs formalities. This rule is only valid for
belongings that are already in free circulation and on which all taxes have been paid.
2.2.6 Registration tax on private cars and motorcycles (BPM)
If an employee who has transferred his principal place of residence to the
Netherlands brings in his car (or motorcycle), the car has to be registered here. He
will then owe Dutch car tax, called ‘BPM’ (‘Belasting op personenauto’s en motor-
rijwielen’). Also if the car is not registered in the database of the Public Department of
Road Traffic, BPM will be due if the car is used on the Dutch public roads. However,
if the car is part of the personal property of the employee and is transferred to the
Netherlands in connection with a relocation, then an exemption may be obtained.
Subject to certain conditions, even company cars can be considered personal goods
to which a tax exemption applies.
The conditions that have to be met in order to be granted an exemption for BPM are
similar to those mentioned in section 2.2.5.1.
This exemption constitutes quite a savings, which is why the customs authorities are
vigilant when it comes to enforcing it, both during the application phase as well as
after the vehicle has been imported. At the very least, the following documents will
have to be shown:
• registration forms (licence plates);
• invoice of purchase.
The registration of the car is entered in the database of the Public Department
of Road Traffic. If the car is sold, leased, lent out or otherwise transferred within
12 months after importation, the customs authorities will be informed of this and they
will impose the BPM retroactively, in most cases with an additional penalty.
The above also applies to cars and motorcycles that are transferred from another
Member State of the EU to the Netherlands. In this case, however, the authorisation
must be requested from the tax authorities instead of the customs authorities.
If the conditions are not met when the car is brought into the Netherlands, BPM will
be due. If the car is imported from outside EU, also VAT (21%) and/or import duties
will be due. The current rate of import duty is, in most cases, 10%.

2.2.7 Motor vehicle tax
In principle, any person in whose name a motor vehicle is registered owes road tax.
This tax is paid in advance. The taxpayer is entitled to a refund on a time-propor-
tionate basis if the car is de-registered or registered in the name of another person
before the end of the term.
2.2.8 Real estate tax/other charges
Real estate tax is a municipal tax due in connection with the ownership (or certain
derived rights) of real estate in the Netherlands. The tax is calculated over the WOZ-
value of the property, being the official appraisal value determined by the municipality
on an annual basis. Rates vary from one municipality to another.
There are various other, minor, charges, such as local tax on dog ownership, waste
collection tax, water board tax, pollution charge, etc.
2.2.9 Double taxation
Since an individual who is a resident of the Netherlands has to pay tax on his world-
wide income, he may be faced with double taxation if he earns income outside the
Netherlands. After all, income earned abroad is usually subject to local taxes.
This situation is covered by the tax treaties the Netherlands has concluded with many
countries. The countries with which the Netherlands has concluded a tax treaty are
summarised in Appendix 1.
If the Netherlands has not concluded a tax treaty with the other country, specific
national regulations protect the individual from double taxation.
This often means that income earned abroad is exempted from taxation in the
Netherlands, although it will be taken into account for the purpose of calculating the
(progressive) tax rates applicable to the taxpayer’s further taxable income, which is
thus taxed in the normal way.
Some treaties, however, provide a ‘credit method’. Under many treaties, the credit
method is applicable to director’s fees. The tax credit is limited to the lower of either
of the following: the amount of tax due in the other country, or the amount of tax pay-
able in the Netherlands over that income.
Employment income
In most tax treaties the Netherlands has concluded with other countries, employ-
ment income earned by a tax resident of the Netherlands in another country than the
Netherlands is taxable in the Netherlands, provided that the following conditions
are met:

1. the resident taxpayer is present in the other country for a period or periods not
exceeding in the aggregate 183 days in any 12-month period or (tax) year; and
2. the remuneration is paid by or on behalf of an employer who is not a resident of
the other country; and
3. the remuneration is not borne by a permanent establishment of the employer or
by a permanent representative in the other country.
If one or more of these (cumulative) conditions are not met, the income related to
employment activities carried out in the other country may be taxed in the other
country. In that case, the Netherlands is held to grant a relief for double taxation.
Regarding the second condition; the Netherlands Supreme Court ruled in December
2006 that – solely for purposes of applying the tax treaty – the company to which the
employee is made available is to be considered this employee’s economic employer
if the following conditions are met:
1. a relationship of authority exists between the employee who is sent to work
abroad and the receiving company in the country of employment; and
2. the work is carried out at the expense and for the risk of the company in the
country of employment, the latter entailing that:
• the benefits of the employment activities as well as the disadvantages and
risks are for the account of the receiving company; and
• the costs in connection with the employment are borne by the receiving com-
pany in the country of employment. If the employment income is paid by the
legal employer in the country of origin, then these costs should be specified
and charged to the economic employer in the country of employment on an
individual basis.
The impact of this rule is that, regardless whether the resident employee spends less
or more than 183 days in the other country, the other country is allowed to levy tax
as of the first day, if the receiving company in that country is considered to be the
economic employer. Please note that the Supreme Court has only ruled on the Dutch
interpretation of the tax treaties. In the other country it may, for example, be decided
that the position of the formal employer is the decisive factor when determining which
country may levy taxes. This will always have to be determined in advance, in order
to avoid double taxation. Please bear in mind that the status of economic employer
is relevant only for the application of the tax treaty and does not influence the civil
employer-employee relationship or the obligations of the legal employer for Dutch
wage tax purposes.

Statutory director’s fee / supervisory board member’s fee
As far as fees received by a resident statutory director or supervisory board
member of an entity established outside the Netherlands are concerned, the country
of establishment is entitled to levy tax under most tax treaties the Netherlands has
concluded, even if the director or supervisory board member does not physically
perform his duties in that country (please note that an exception is made in several
tax treaties).
Tax treaty with Belgium and Germany
Under the treaty between Belgium and the Netherlands, employees who are
residents of the Netherlands, but work in Belgium and are subject to Belgian taxation
on their employment income, are compensated by the Netherlands for the difference
between the (higher) Belgian taxes and the Dutch taxes, as well as for the loss of the
benefit of tax-deductible items (‘compensatieregeling’).
The new tax treaty between the Netherlands and Germany, effective as of 2016,
provides a similar compensation scheme.
2.3 Non-resident taxpayers
This section is intended for taxpayers who are considered non-residents of the
Netherlands for tax purposes (see 2.1) and partly (for income in Box 2 and Box 3
only) for partial non-resident taxpayers (see 2.4).
2.3.1 Income tax
2.3.1.1 Limited tax liability
A non-resident taxpayer is only liable to pay income tax in the Netherlands on his
income from certain Dutch sources, resulting in limited tax liability. The tax year runs
from 1 January through 31 December.
2.3.1.2 Sources of taxable income
The main sources of income that determine a non-resident taxpayer’s taxable
income in the Netherlands are income from business, employment, real estate (in
the Netherlands), periodic benefits (whether in cash or in kind) and a substantial
shareholding in a Dutch company. Tax is due over the gross income less deductible
expenses. Partners are taxed on an individual basis.
Box 1: Income from work and home

Employment income
For non-resident taxpayers, taxable sources of employment income are:
1 income earned from present or past employment in the Netherlands, but only the
income earned on working days physically spent in the Netherlands is taxed in
the Netherlands (please note that there are some exceptions to this rule);
2. income earned in the capacity of statutory director or member of the supervisory
board of an entity established in the Netherlands, even if the actual duties are
performed solely abroad (exceptions under several tax treaties); under most
treaties the full remuneration may be taxed in the Netherlands.
Employment income is discussed in more detail in section 2.3.2.1.
Business income/self-employed
Business income is taxable in the Netherlands if (the company of) the self-employed
person has a permanent establishment (e.g. a branch) or a permanent representa-
tive in the Netherlands. Specific regulations and exemptions apply to the calculation
of business income earned in the Netherlands.
Income from lucrative interests
Income from and capital gains on certain financial instruments (e.g. carried inter-
est, ‘sweet equity’ and non-recourse loans) used as an employee incentive in the
Netherlands are taxable in Box 1, in principle.
Periodic benefits
Income in the form of periodic benefits including certain State benefits.
Deductible expenses
Certain items may be deducted from the total amount of the abovementioned sources
of income, such as negative income over previous years.
Box 2: Income from substantial shareholding
If a non-resident, together with his fiscal partner, owns at least (directly or indirectly)
5% of the shares or of any class of shares in a company established in the
Netherlands, the related income is taxed in Box 2. Certain expenses can be deducted.
Capital gains
Although the main rule is that capital gains are tax-exempt and capital losses not
tax-deductible, an exception applies to capital gains on shares if the shareholder
has an (in)direct substantial shareholding in a Dutch company. In that case, capital
gains are taxed in Box 2.

Box 3: Income from savings and investments
The value on 1 January of a limited number of assets in the Netherlands (for instance,
real estate in the Netherlands) reduced with debts, form the basis for taxing a fixed
notional income of 4% of this balance. The actual income realised is not taxed.
Personal allowances are not available to non-resident taxpayers.
2.3.1.3 ‘Qualifying non-resident taxpayers’ regime as of 2015
In order to enable non-resident employees to benefit from tax benefits they cannot
(fully) realise in their home country (since their income is not (fully) taxed there),
certain non-resident taxpayers enjoy the special status of ‘qualifying non-resident
taxpayer’. If the related conditions are met, they are (almost) fully treated as resident
taxpayers, which entitles them to make use of the partner rule, tax rebates and tax
deductibles.
Conditions
The following conditions apply:
• the regime is available to residents of EU Member States, EEA and BES
countries5
;
• at least 90% of the income is subject to Dutch wage tax or income tax;
• an annual income statement issued by the tax authorities of the home country is
submitted, demonstrating that the 90%-criterion has been met.
Partner
A qualifying partner is a person
• who would have been the individual’s partner for tax purposes, had both been
residents of the Netherlands (see 2.2.1.4);
• who satisfies – individually or together with the employee – the 90%-requirement.
Deductibles can be realised in as far as the home country does not honour the
employee’s and/or his partner’s tax deductibles.
National insurance contributions
Tax deductibles may also be used for establishing the basis for calculating the
national insurance contributions.
2.3.1.4 Tax rates
The total income tax due is the sum of the income tax calculated over the taxable
income in three Boxes.
5 Bonaire, Sint Eustatius and Saba.

Income tax is levied together with national insurance contributions. For those
who are insured under the Dutch social security schemes, the amount of national
insurance contributions due is calculated over the first two tax brackets of Box 1.
The total amount of income tax and – if applicable – national insurance contributions
is reduced with the applicable tax rebates.
2016
Box 1 (under 65)6
Taxable income
exceeding
up to tax
in %
national
insurance in
%
total
in %
0 19,922 8.40 28.15 36.55
19,922 33,715 12.25 28.15 40.40
33,715 66,421 40.40 40.40
66,421 52.00 52.00
Box 2
The tax rate applicable to income taxed in Box 2 is 25%.
Box 3
The tax rate is a flat tax rate of 30%.
2.3.1.5 Tax rebates
For non-residents, only a limited number of tax rebates are available.
2.3.1.6 Partner rule
In general, the partner rule (see 2.2.1.4) is not applicable to non-resident tax-
payers, except for residents of Surinam, Aruba, Curacao, (the Dutch part of)
Sint Maarten and Belgium, or to non-residents who are qualifying non-resident
taxpayers (see 2.3.1.3).
2.3.1.7 Tax treaties
Residents of Surinam, Aruba, Curacao, (the Dutch part of) Sint Maarten, Germany
and Belgium are entitled to specific benefits as defined in the applicable tax treaty.
6 Other rates and/or brackets apply as of pensionable age for State pension purposes.

2.3.2 Wage tax
In the Netherlands, an employer has the obligation to withhold wage tax (and national
social insurance contributions, if applicable) from the employment income he pays
his employees (see 2.3.2.3). This deduction is an advance tax to be credited against
the personal income tax eventually due. The tax is calculated over the same brackets
and the same rates apply.
2.3.2.1 Employment income
The term employment income is defined very broadly in Dutch law and comprises
cash benefits, benefits in kind and also entitlements.
Income in cash
Besides regular employment income, cash benefits include expat allowances,
commissions, bonuses, etc.
Income in kind
Benefits in kind include the private use of a company car, free housing, free meals,
free travel, shares, goods, etc. There are general and specific rules for determining
the tax due on benefits in kind.
Entitlements
The third category, entitlements, includes conditional rights to receive one or more
future benefits in cash or in kind. Taxation of most entitlements is deferred to the time
the benefits are received. Examples of such entitlements are pension rights and the
right to benefits under one of the employee insurance schemes (see 3.3.).
The private use of a company car is subject to taxation. The annual benefit is
basically 25%7
of the official Dutch list price of the car. If the employee can prove that
his private mileage does not exceed 500 kilometres per full calendar year (whereby
commuting qualifies as business travel), the taxable benefit in that year will be nil.
A statement confirming this can be requested from the tax authorities. It is necessary
to maintain a detailed kilometre registration and to hold on to all supporting
documents.
Tax-free allowances
In certain cases, an employer is allowed to make tax-free payments or to provide
income in kind, free of tax. For example, as a reward for long periods of service. The
amount of these tax-free allowances is capped.
7 The benefit is calculated at 4%, 15% or 21% of the official Dutch list price of the car for environ-
mental-friendly cars with zero or low CO2-emission.

Pension schemes
The term ‘pension’ is strictly defined for tax purposes. It does not refer to the
General Old Age Pension (‘AOW’, see 3.2.1). A pension scheme that complies with
the pension definition as provided in Dutch tax law is a ‘qualifying pension scheme’.
If a pension scheme qualifies, the employee’s contributions are tax-deductible and
the employer’s contributions are tax-exempt. The benefits are subject to taxation at
the time of payment.
As from 1 January 2015, it is no longer possible to accrue pension rights tax-
efficiently over income exceeding € 101,519. In addition, the yearly accrual rate is
subject to a decrease as from that date.
Participation in a non-Dutch pension scheme requires particular attention, as these
schemes often do not meet the conditions stated in Dutch law. If a pension scheme
does not qualify for Dutch tax purposes, the employee’s contributions are not
tax-deductible and the employer’s contributions constitute taxable income for the
employee. In order for the foreign pension scheme to qualify for Dutch tax purposes,
approval can be requested from the Dutch tax authorities for a limited period of time.
Whether or not such approval is advisable, depends on the situation. The changes
per 1 January 2015 will not apply to pension schemes from other EU Member States.
Employees seconded to the Netherlands who continue to accrue pension rights
under an approved non-Dutch pension scheme (i.e. with a non-Dutch pension fund
or insurance company) will receive a protective tax assessment (‘conserverende
aanslag’) on the pension rights they thus accrue or on the tax-facilitated pension
contributions paid during their employment in the Netherlands.
In principle, the annual increase of these pension rights is subject to taxation. How-
ever, if certain conditions are met, the income tax will not actually be due. If, at any
time, the non-Dutch pension scheme no longer qualifies, the income tax due will
have to be paid. A protective tax assessment is nullified after ten years, upon request.
Stock option rights
Stock option rights are taxable at the time they are exercised. In other words, tax
is due over the gain realised at that moment, being the difference between the fair
market value of the underlying shares at the moment of exercise and the exercise
price of the stock option rights. Please note that an exercise gain realised in relation
to the exercise of stock option rights granted in the period before the start of the
employment in the Netherlands may also be (partially) taxable in the Netherlands.

A Dutch group company may take over the withholding obligations of the non-Dutch
employer after having obtained prior formal approval from the Dutch tax authorities.
If an employee is employed by a non-Dutch employer who does not have a
permanent establishment, a deemed permanent establishment or a permanent
representative in the Netherlands and the employer is not voluntarily registered to
withhold wage tax, then there is no wage withholding tax liability for the employer;
consequently, the employee will have to file an annual income tax return and pay
income tax upon assessment.
2.3.3 Gift tax and inheritance tax
The inheritance tax and gift tax levied upon the death of a non-Dutch non-resident
(being a non-resident who does not have Dutch nationality) or on a gift by a non-
Dutch non-resident have been abolished as of 1 January 2010.
Deemed resident
A Dutch national is deemed to be a resident of the Netherlands up to ten years after
leaving the Netherlands. If the Dutch national dies or makes a gift within this ten-year
period, the acquisitions by the beneficiaries of the deemed Dutch resident may be
taxed with Dutch inheritance tax or gift tax.
A person, of any nationality, who lived in the Netherlands, but has left the Netherlands
and makes a gift within a year after leaving the Netherlands is a deemed resident of
the Netherlands for gift tax purposes. It is not relevant whether or not he was a partial
non-resident taxpayer for income tax purposes under the 30%-ruling (see 2.4.6).
Inheritance tax is due over what an individual receives upon the death of a person
who was a resident or was deemed to be a resident of the Netherlands. When
levying inheritance tax, it is not relevant whether the beneficiaries are living in the
Netherlands. It is also not relevant in which country the assets of the deceased are
located. The Netherlands will impose tax on a worldwide basis. The beneficiaries are
liable for the inheritance tax.
Similar rules apply to gifts received from a person who is a resident or is deemed
to be a resident of the Netherlands. In that case, the beneficiary owes gift tax. The
person who makes the gift is also liable for the gift tax.

The tax is levied on the fair market value of the received assets at the time of receipt.
There are some tax exemptions. The exemptions and rates depend on the value
of the inheritance or gift and the (family) relationship between the deceased/donor
and the beneficiary. The tax rate varies from 10% to 40%. Acquisitions by children

from their parents are taxed at a rate of 10% to 20%, depending on the value of
the inheritance or gift. A gift or inheritance received from a non-related person is
taxed at a rate that ranges between 30% and 40%, depending on the value of the
inheritance or gift.
It is, of course, possible that – in the case of an inheritance or gift – inheritance tax
or gift tax (or a similar tax) is due in another country as well. The Netherlands has
entered into treaties for the purpose of avoiding double taxation in this area with a
limited number of countries. If there is no applicable treaty, the Netherlands, in some
situations, will show some leniency based on the Decree on the Avoidance of Double
Taxation 2001.
2.3.4 Real estate transfer tax
In the case of a transfer of (certain rights pertaining to) real estate located in the
Netherlands, the transferee is subject to tax on the transfer. The tax is levied on the
value of the house(s), at a rate of 2%. Other real estate is taxed at a rate of 6%.
2.3.5 Real estate tax/other charges
Real estate tax is a local tax due in connection with the ownership (or certain derived
rights) of real estate in the Netherlands. The tax is calculated over the WOZ-value of
the property, being the official appraisal value determined by the municipality on an
annual basis. Rates vary from one municipality to another.
There are various other, minor, charges, such as local tax on dog ownership, waste
collection taxes, water board tax, pollution charge, etc.
2.3.6 Double taxation
Since a non-resident taxpayer generally also owes tax in his country of residence on
income earned in the Netherlands, he could be faced with double taxation.
Employment income
This situation is covered in tax treaties. The countries with which the Netherlands
has concluded a tax treaty are summarised in Appendix 1.
In most of the treaties the Netherlands has concluded with other countries, employ-
ment income is tax-exempt in the Netherlands, if that all following conditions are met:
1. the non-resident taxpayer is present in the Netherlands for a period or periods not
exceeding in the aggregate 183 days in any 12-month period or in a (tax) year;
and
2. the remuneration is paid by or on behalf of an employer who is not a resident of
the Netherlands; and
3. the remuneration is not borne by a permanent establishment of the employer or
by a permanent representative in the Netherlands.

If one or more of these (cumulative) conditions are not met, the income related
to employment activities carried out in the Netherlands may be taxed in the
Netherlands. In that case, the country of residence is held to grant a relief for double
taxation.
Regarding the second condition; the Netherlands Supreme Court ruled in December
2006 that – solely for purposes of applying the tax treaty – the company to which the
employee is made available is to be considered this employee’s economic employer
if the following conditions are met:
1. a relationship of authority exists between the employee who is sent to work
abroad and the receiving company in the country of employment; and
2. the work is carried out at the expense and for the risk of the company in the
country of employment, the latter entailing that:
• the benefits of the work activities as well as the disadvantages and risks are
for the account of the receiving company; and
• the costs in connection with the work are borne by the company in the coun-
try of employment. If the employment income is paid by the legal employer
in the country of origin, then these costs should be specified and charged to
the economic employer in the country of employment on an individual basis.
The impact of this rule is that, regardless whether the non-resident employee spends
less or more than 183 days in the Netherlands when working here, he will owe
income tax in the Netherlands as of day one if the receiving Dutch company is
considered to be his ‘economic employer’. Please note that the Supreme Court has
only ruled on the Dutch interpretation of the tax treaties. In other countries it may be
decided that the position of legal employer is the decisive factor when determining
which country may levy taxes. This will always have to be determined in advance, in
order to avoid problems with double taxation. Please bear in mind that the status of
economic employer is relevant only for the application of the tax treaties and does
not influence the civil employer-employee relationship or the possible obligations of
the legal employer for Dutch wage tax purposes.
The employee will owe personal income tax. The Netherlands economic employer
will not be required to deduct payroll taxes, though the formal employer abroad may
be (see 2.3.2.3).
Based on a Decree of the Ministry of Finance, in case of a short-term (not exceeding
60 working days in any period of 12 months) secondment to a Dutch group of compa-
nies, the Netherlands will not levy taxes over the employment income, provided that
the employee is assigned to the Netherlands because of his specific knowledge, an
exchange programme or for career development reasons. Then it is assumed that

the employment activities do not form an integrated part of the business activities of
the Dutch group of companies, so that therefore no relationship of authority – which
is required for having an economic employer in the Netherlands – exists.
Statutory director’s/supervisory board member’s fee
As far as fees received by a non-resident statutory director or supervisory board
member of an entity established in the Netherlands are concerned, the Netherlands
is entitled to levy tax under most tax treaties the Netherlands has concluded, even
if the director or supervisory board member does not physically perform his duties
in the Netherlands.
If the non-resident taxpayer is a resident of a country with which the Netherlands has
not concluded a tax treaty, in general no tax relief is granted, unless special national
rules in his home country provide a relief for double taxation.
2.4 The 30%-ruling
2.4.1 Introduction
The 30%-ruling is a tax facility provided in the Wage Tax Act for employees who have
been seconded to the Netherlands or recruited from abroad to work in the Nether-
lands and who meet certain conditions. These employees are referred to as ‘extra
territorial employees’. If the facility is granted, the employer may pay the employee a
– fixed – tax-free allowance of up to 30% of the employee’s employment income. The
30%-tax free allowance is meant to cover extraterritorial expenses: extra expenses
incurred as a consequence of the fact that the employee works outside his home
country. The ruling may also have positive consequences for the employee’s income
tax position: resident employees have the option of being treated either as a resident
taxpayer or as a partial non-resident taxpayer.
As of 1 January 2012, a number of restrictions to the 30%-ruling apply. Transitional
rules exist for employees who were entitled to the ruling before this date.
Employees who do not satisfy (all) requirements of the 30%-ruling can receive a
tax-free allowance for the actual extraterritorial expenses instead of a fixed
30%-allowance, but the employer then has to submit proof of these expenses.
2.4.2 The conditions for the 30%-ruling
The 30%-ruling is available to employees only. Statutory directors and supervisory
board members of a company established in the Netherlands may also qualify as
employees, as well as shareholders of a Dutch company, even if their employer is
their own personal company.

The 30%-ruling is also available to those employees who do not (physically) carry
out their work in the Netherlands, but whose income is nonetheless taxed here.
Therefore, statutory directors and supervisory board members living abroad may
also qualify. The employee does not need to be a resident of the Netherlands.
Whether an employee satisfies the conditions of the 30%-ruling or not depends on
the circumstances at the time the employment agreement is concluded.
Coming from abroad
The employee must be seconded to the Netherlands or recruited from outside the
Netherlands. Furthermore, the employee must have lived at a distance of more than
150 km from the Dutch border during more than 2/3 of the 24-month period preceding
the start of the employment in the Netherlands. Several court cases contesting this
additional requirement are pending.
Dutch payroll
In order for the ruling to apply, an employer (Dutch or non-Dutch) must be a Dutch
wage tax withholding agent maintaining a payroll in the Netherlands.
Specific expertise/scarcity
The employee must have specific expertise which is not or scarcely available on the
Dutch labour market. The requirement of specific expertise is a minimum salary level:
if the taxable annual salary of the employee exceeds an amount of € 36,889 (2016),
it is assumed that the employee has the required specific expertise. For employees
under the age of 30 with a qualifying Master’s degree, a minimum salary level of
€ 28,041 (2016) is applicable. During the term of the 30%-ruling, the salary require-
ment which is adapted each year, must be met continuously.
Request of both employee and employer. Application term four months
A request for the application of the 30%-ruling will only be granted if the employee
and the employer jointly file an application with the Tax Office for Non-Residents
in Heerlen. The Tax Office will confirm its approval through a formal Decision. The
application for the 30%-ruling must be filed within four months from the start of
the employee’s employment (first working day) in order to be allowed to apply the
30%-ruling (retroactively) as of the first day. If the application is filed late (i.e. not
within four months), the 30%-ruling will apply as of the month succeeding the month
in which the application is filed, while the time already spent in the Netherlands will
be deducted from the maximum period of eight years.

Employment agreement
For the 30%-ruling to apply, the employer and employee must agree (in writing) that
a separate tax-free allowance for extraterritorial expenses will be paid in addition to
the gross salary, amounting to (at a maximum) 30% of the remuneration.
In order to not increase the costs of the employment for the employer, the contractual
gross salary must be reduced with the 30%-allowance. Reducing the contractual
gross salary could have an impact on certain benefits and the employee’s social
security position. For practical reasons, an administrative split can be made in the
payroll administration, taking, as a basis, the original gross salary. The conditions for
this are (a) that an agreement in writing is made between employer and employee,
stating that the 30%-ruling applies (preferably in an addendum to the employment
contract), and (b) that the consequences of reducing the contractual gross salary are
implemented correctly in the payroll calculations.
Maximum period of eight years
The ruling applies for a maximum period of eight years, as long as the employee
meets the requirements of the 30%-ruling (which will be verified continually).
Reduction with periods of earlier presence in the Netherlands
All earlier periods of presence or employment in the Netherlands will be deducted
from the maximum period of eight years, unless there is a period of at least 25 years
between the date of leaving the Netherlands and the date of return. Periods of pre
vious presence or work in the Netherlands that ended (!) more than 25 years prior
to the employee’s return to the Netherlands, will not be taken into account. Relaxed
rules apply in case of limited earlier presence or employment in the Netherlands.
New employer
If an employee benefiting from the 30%-ruling changes employers, with an inter
ruption of three months8
at a maximum, he will again be able to benefit from the
30%-ruling in his new employment (provided that the conditions are met), after
having filed a new application (within four months) for the remaining part of the
maximum period originally granted.
2.4.3 Consequences of the 30%-ruling for wage tax purposes
The 30%-ruling is applicable to income from present employment only. Therefore, the
30%-ruling cannot be applied to severance payments and pension benefits (being
income from past employment). Also, the 30%-ruling is not applicable to payments
8 Between the termination date of the contract with the former employer (N.B. when on garden
leave this is the last actual work day!) and the date on which the new employment is agreed upon
(not necessarily the starting date of the new employment).

made after the termination date of the employee’s employment in the Netherlands.
Final settlements should be made prior to the end of the month following the month
in which the employee stopped working in order to be allowed to apply the 30%-
ruling on the final payments.
After having calculated the tax-free 30%-allowance (see 2.4.4), an employee’s
taxable wage is assessed in the same way the income of all employees in the
Netherlands is. Tax-free allowances for certain expenses may be paid in addition to
the 30%-allowance. Additional allowances for specific extraterritorial expenses may
be taxable.
School fees for international schools
The employer may pay a tax-free allowance to cover the school fees for children
attending an international (primary or secondary) school. An allowance for the cost
of private transport (when not arranged by the school) is not tax-exempt. Under
certain conditions, Dutch schools with an international stream also qualify as an
‘international school’ for this purpose. This facility is available for all extraterritorial
employees, also if the 30%-ruling is not granted.
2.4.4 The non-taxable 30%-allowance
2.4.4.1 Calculation of the 30%-allowance
The tax-free allowance for extraterritorial expenses that can be paid is 30% (at a
maximum) of a specific basis.
2.4.5 Impact of the 30%-ruling on social security and pensionable base
If an employee is compulsorily covered under the Dutch social security system (see
3.2) and the 30%-ruling applies, the basis over which the contributions are calculated
is reduced. If the contractual gross salary is reduced due to the application of the
tax-free 30%-allowance (see 2.4.2), employee insurance contributions are due over
this lower salary only. Consequently, future benefits may also be lower. In principle,
pension rights may be accrued over the full salary (including the 30% allowance),
provided the pension scheme provides for accrual pension over a tax-free allowance.
2.4.6 Partial non-resident tax liability
An employee who is a tax resident of the Netherlands and benefits from the 30%-
ruling can choose whether he wishes to be treated as a resident taxpayer or as a
(partial) non-resident taxpayer.
As a partial non-resident taxpayer, the individual is regarded as a resident taxpayer
for income tax in Box 1. Therefore, on the whole, section 2.2 applies to his situation.

The limited tax liability of a ‘real’ non-resident taxpayer also applies to partial non-
resident taxpayers for income taxed in Box 2 and Box 3 (see 2.3).
On the basis of the US-NL tax treaty, US citizens and green card-holders who have
opted to be treated as a partial non-resident taxpayer, are considered ‘real’ non-
resident taxpayers for their employment income. This implies that they only owe
taxes on income earned on work days of physical presence in the Netherlands.
Different rules apply to US citizens and green card-holders who act as a statutory
director or supervisory board member of a Dutch company. For other income and
deductibles in Box 1, taxpayers who opt to be treated as partial non-resident tax
payers are treated as resident taxpayers.
If the employee is not a resident of the Netherlands for tax purposes, he will be
treated as a ‘real’ non-resident taxpayer. However, if the related conditions are met,
he will be considered a ‘qualifying non-resident taxpayer’ (see 2.3.1.3).
2.4.7 Summary
The advantages and disadvantages of the resident tax status in comparison with the
(partial) non-resident tax status can be summarised as follows:
Resident taxpayer Non-resident taxpayer
(partial)
Non-resident taxpayer
(real)
Unlimited tax liability:
total worldwide income
taxed in the Netherlands
Limited tax liability:
worldwide income subject
to income tax in Box 1;
limited tax liability in
Box 2 and 3
Limited tax liability,
income tax due in the
Netherlands on a limited
number of sources of
income, in most cases
Dutch employment
income and notional
income from real estate in
the Netherlands only
Entitled to deductions
and exemptions in Box 1
Entitled to deductions
and exemptions in Box 1
Entitlement to deductions
and exemptions limited*

Resident taxpayer Non-resident taxpayer
(partial)
Non-resident taxpayer
(real)
Employment income
earned outside the
Netherlands always
subject to taxation in the
Netherlands. Relief for
double taxation available
Employment income
earned outside the
Netherlands subject to
tax in the Netherlands.
Relief for double taxation
available
Employment income
earned on days of
physical presence outside
the Netherlands not
subject to taxation in the
Netherlands
The 30%-ruling can only
be applied to income
in as far as no relief for
double taxation is claimed
The 30%-ruling can only
be applied to income
in as far as no relief for
double taxation is claimed
Tax rebates available Tax rebates available Tax rebates limited*
Partner rule available Partner rule available Partner rule not available*
Dutch dividend tax and
foreign source taxes may
be credited with Dutch
income tax
foreign source taxes
cannot be credited with
Dutch income tax
foreign source taxes
cannot be credited with
Dutch income tax
Mortgage interest paid
for principal residence
deductible
for principal residence
deductible
for Dutch real estate
(or principal residence
abroad*) not deductible
* Except (only partly/subject to certain conditions) for residents of Surinam, Aruba, Curacao, (the
Dutch part of) Sint Maarten, Germany and Belgium, and/or qualifying non-resident taxpayers
(see 2.3.1.1).
Conclusion
In almost all situations, the partial non-resident tax status will be attractive. Depend-
ing on the actual circumstances, non-residents may benefit from being a qualifying
non-resident taxpayer (see 2.3.1.1).

2.5 General provisions
2.5.1 Social security/tax registration number (BSN)
Each individual working in the Netherlands must obtain a ‘Burgerservicenummer’
(‘BSN’) from the municipality. This code is required for social security, wage and
income tax purposes. Those who stay in the Netherlands for a period exceeding
four months in a six-month period have to register with the municipality (‘GBA’). Non-
residents staying in the Netherlands for a period not exceeding these four months
also have to register but as non-residents (‘RNI’).
2.5.2 Tax return, tax assessment, objection and appeal, preliminary tax refund
Not every taxpayer in the Netherlands has to file an income tax return. An income
tax return should be filed if the amount of income tax due, after taking into account
the wage tax paid and the preliminary tax refunds, exceeds € 45.
Both resident and non-resident taxpayers are only entitled to the payment of a
refund, if this refund exceeds € 14. To obtain this tax refund, they have to file an
income tax return.
Personal income tax returns must be filed prior to 1 April9
of the year following the
year of assessment. Subject to certain conditions, an extension for filing is available.
If the tax return is not filed on time, a fine can be imposed. Income tax returns are
filed electronically.
The tax authorities may impose a preliminary tax assessment in anticipation of the
final assessment.
Taxpayers can file a letter of objection against a final tax assessment with the tax
authorities within six weeks of the date of the assessment. If the tax authorities do
not agree with the objection, an appeal can be lodged with the First Court of Appeal
(‘Rechtbank’). If the First Court dismisses the appeal, it is possible to lodge an appeal
with the Second Court of Appeal (‘Gerechtshof’) and finally – if necessary – with the
Supreme Court of the Netherlands (‘Hoge Raad’).
In order to realise the tax benefit related to tax-deductible items at an earlier point
in time than through the (final) income tax assessment, a request can be filed elec-
tronically with the tax inspector to pay the tax refund in advance during the current
year through a preliminary tax refund.
9 For non-resident taxpayers and migrating taxpayers the filing date is 1 July.

The deductible amounts should be estimated as accurately as possible. The tax
refund is paid out by the tax office directly into the individual’s bank account on a
monthly basis. After having filed the income tax return for the (calendar) year, an
income tax assessment is imposed for the final amount of tax due over the year in
question. The final tax assessment is calculated, taking into account the preliminary
tax refund.
2.5.3 Interest
Statutory interest may be due in connection with the payment of tax/national
insurance contributions after the end of the tax year.
2.5.4 Penalties
If the filing obligations are not met or the tax payments are late, the tax authorities
may impose penalties.

3 Social security
3.1 Introduction
Individuals who are employed in the Netherlands are, in principle, subject to the
Dutch social security system. This legislation also applies to their accompanying
partners and other members of their families.
There are two kinds of compulsory social security schemes in the Netherlands; one
that is applicable to the population in general and one for employees.
3.2 National Insurance Schemes
The national insurance schemes (‘volksverzekeringen‘) basically cover all persons
who live or work in the Netherlands. These schemes are contained in the following
legislation:
• General Old Age Pensions Act (‘AOW’);
• Surviving Dependants Act (‘ANW’);
• Long term care Act (‘WLZ’)
• General Child Benefit Act (‘AKW’).
3.2.1 General Old Age Pensions Act (‘AOW’)
Those insured by the AOW are entitled to an old age pension upon reaching pension-
able age. The AOW has been changed per 1 January 2013, introducing a gradual
raising of the pensionable age for the old age pension, as a consequence of which
it will be brought up to 67 by the year 2023. The entitlement is built up during a period
of 50 years. For each year the beneficiary is insured, he accrues 2% of the maximum
benefit. The full pension (2016) is € 1,138.15 (excluding a holiday bonus of € 71.56)
per month for a single person and € 1,542.26 (excluding a holiday bonus of € 102.24)
per month for a married couple. Special rules apply to persons who live together and
are not married and to pensioners with a partner under the pensionable age.
3.2.2 Surviving Dependants Act (‘ANW’)
Those who are insured by the ANW are entitled to benefits for widows, widowers
and dependent children. The deceased spouse, partner or parent must have been
covered by the ANW on the date of his or her death.

Employment in the Netherlands - 2016

Employment in the Netherlands - 2016

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