Expatriate tax - The Netherlands

Non-EU nationals typically need to apply for a residence and work permit before starting employment in the Netherlands. Additionally, it is essential to structure the expatriate's employment contract and benefit package in a tax-efficient manner prior to the assignment's commencement.

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

In the Netherlands, there are various tax forms (C/M/P) for individuals, with the specific form depending on the individual's personal situation.

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

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

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

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

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

As from January 1, 2023 there have been changes regarding the taxation of employee stock options. Under the new regime, the starting point is that the benefit from employee stock option plans is taxed on the date that the shares, received when exercising the stock options, become tradeable. However, employees may instead choose/opt to be taxed on the date the option is exercised, which was the taxable moment up to and including 2022.

Stock options granted during the employment in the Netherlands and exercised after leaving the Netherlands can still be considered Dutch taxable wages.

A stock appreciation right (SAR) is essentially a cash bonus which in general is subject to taxation at the moment of pay-out.

In case an employee is granted or eligible to purchase company shares, this may also lead to taxable salary.

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

Any remuneration received for labor performed in the Netherlands is considered Dutch sourced income and is consequently subject to Dutch income tax, irrespective of the expatriate's tax residence status (subject to the relevant double taxation treaty).

Most benefits in kind provided by an employer will be subject to Dutch wage or income tax. For example, the usage of a company car is considered taxable income in the Netherlands (except if driven exclusively for business purposes).

The Dutch 30%-ruling is a special tax facility for expatriates that are recruited from abroad to work in the Netherlands. Under this ruling, a maximum of 30% of the gross taxable wage can be paid out on a tax free basis to cover for so-called extraterritorial or ET-costs (additional costs incurred due to working outside of the country of origin).
As from January 1, 2024, an employer can reimburse a maximum of 30 percent of the employee's income tax-free, up to the "WNT standard" ("Balkenende standard"). Any amount exceeding this standard is subject to the regular tax rate. Based on the 2024 WNT standard (233,000 euros), this tax-free reimbursement amounts to 69,900 euros per year.

An expatriate eligible for the 30% tax ruling may choose to be treated as a partial non-resident taxpayer. This implies that they would be accountable for Dutch taxable income solely from employment (and/or business profits), home ownership in the Netherlands, and income from a substantial interest in a Dutch company. Please note that new legislation is expected in this area in 2024. Therefore, it is advisable to closely monitor any developments.

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

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

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

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

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

Finally, certain levy rebates may be applicable.

There is no capital gains tax in the Netherlands.

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

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

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

The Dutch tax residency rules determine an individual's liability for taxation on savings and other investment income. Proposed legislative measures suggest an increase in the tax rate from 32% to 36% effective from January 1, 2024. Moreover, the government proposes to maintain the tax-exempt asset amount in box 3 at €57,000 (€114,000 for fiscal partners) by not indexing it.
The basis for savings and investments is the yield basis at the beginning of the calendar year (reference date), to the extent that this yield basis exceeds the tax-exempt amount.

The effective yield percentage is determined by dividing the yield by the yield basis. Specifically, the yield is calculated as 0.01% of the value of bank deposits on the reference date and 6.17% of the value of other assets on the same date, with a reduction of 2.46% of the value of debts. If the calculated yield is negative, it is adjusted to zero.

It is important to note that this taxation system is considered transitional law until approximately 2027, when the new system for taxing income from savings and investments will come into effect.

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

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

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

Social Security 2023 - 'National Insurance Contributions'

Social Security 2020 - 'Employee Insurance Contributions'

The maximum premium income for the employee insurance contributions is capped at €71,624 for the year 2024.

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

There is no wealth tax in the Netherlands.