Working in the Netherlands for a foreign employer? Taxsight explains how to set up the right tax structure and apply for the 30% ruling.
When you become a Dutch resident, you become in principle taxed in the Netherlands on your worldwide income. That means that you are, in general, obliged to file the annual personal tax return if you have anything to declare that leads to taxes, or when the Dutch tax office sends a filing request.
It is, of course, also possible to file a personal income tax return if you expect to receive a refund.
Foreign employer
People often move to the Netherlands while still working for their foreign employer. This could be a temporary setup, but in many cases it could also for a longer term.
When you become a Dutch resident while still working for a foreign employer you are, generally speaking, taxed in the Netherlands for those workdays. On the basis of the bilateral tax treaty law, the workdays performed in the Netherlands by a Dutch resident are taxed in the Netherlands.
The tax will be levied via the annual personal tax return of the employee in cases where the employer didn't take any action to set up a tax stature in the Netherlands.
Payroll-only structure
The foreign employer can also set up a tax structure for the employee, known as payroll-only. The employer can apply for this structure by registering with the Dutch tax authorities (Belastingdienst). They will then become the withholding agent for the payroll tax or national insurance contributions and the employee insurance contributions.
The national insurance contributions are included in the lower income tax rate of around 37%. The maximum rate is around €10.500 per year and the premium mainly finances the state pension.
The premiums are withheld from the gross salary when the employee is on a Dutch payroll. These premiums are therefore no extra burden for the employer. However, these premiums are a burden for the employee and levied in any case via the personal tax return in case of a non-registered foreign employer.
The Box 1 rates are as follows for 2024:
| Brackets | Taxable income | Percentage |
|---|---|---|
| 1st bracket | Up to €75.518 | 36,97% |
| 2nd bracket | From €75.518 | 49,50% |
When the employer withholds the payroll taxes on a monthly basis, the employee will not be confronted with the full tax amount via the personal income tax return. The payroll only structure could therefore be a solution for a foreign employer as well the employee.
Employee insurance contributions
On top of the gross salary, the employer also pays employee insurance contributions if the employee is socially-secured in the Netherlands. The employer insurance contributions are around 18% of the gross taxable income with a maximum amount of around €10.000 per year.
Additionally, they cover the long-term disability insurance, the potential unemployment benefit and the government healthcare insurance premiums in the Netherlands.
30% ruling application
When an employee is on a Dutch payroll, they may also qualify for the 30% ruling. The 30% ruling can give tax benefits for a maximum period of five years (minus the period of the employee's previous stay in the Netherlands).
With the 30% ruling, the employee can get up to 30% of their income tax-free. Note that starting from 2024, the 30% ruling can only be applied to a maximum annual salary of around €233.000. These conditions may also apply starting from 2026 if a person's employment falls under the transitional period.
New regulations for 30% ruling
However, starting in 2024, there are new regulations to the 30% ruling. If a new employee starts their 30% ruling period in 2024, they will receive only 30% of their salary tax-free for the first 20 months. In the second 20-month period, the employee is exempt from taxation on 20 percent of their salary. Finally, in the last 20 months of the term, the tax-free allowance is a maximum of 10% of the salary.
30% ruling and partial non-resident taxpayer
If a resident has been granted the 30% ruling, they can opt to be treated as a partial non-resident taxpayer. This has implications for Box 2 and Box 3 taxation.
Box 2
The dividend payments received as a substantial shareholder (5% or more) in a foreign entity could be exempt from Dutch taxes in Box 2. The person must have the 30% ruling and be considered a partial non-resident taxpayer.
It is required that the company which distributes the dividends is, on the basis of international tax residency rules, not located in the Netherlands.
Note that because of the new 30% ruling regulations, starting from 2025 employees with the 30% ruling application should declare this as Box 2 income as well.
However, employees who already had the 30% ruling in 2023 fall under the transitional law. Starting from 2027, they should declare the foreign Box 2 income regardless of whether the 30% ruling still applies.
Box 3
A partial non-resident taxpayer - along with their tax partner - does not have to declare or pay tax on savings and investments in Box 3. The only exception is Dutch real estate that is not considered your primary residence. This real estate should be declared in Box 3 of the personal income tax return.
Note that the 2024 regulations on the 30% ruling affect Box 3 as well. Starting from 2025, employees with the 30% ruling should declare their assets. However, employees who already had the 30% ruling application in 2023 fall under the transitional law. Starting from 2027, employees should declare their assets regardless of whether the 30% ruling still applies.
Do you need help with figuring out your tax obligations or with the 30% ruling as an expat in the Netherlands? Taxsight has many years of experience in helping their clients with local and international tax matters. Contact their team by calling +31 (20) 261 3221 or emailing [email protected].