NetherlandsTax Obligations Detailed

In 2025, Dutch employers face key changes in payroll taxes, social security contributions, and regulations regarding self-employment.

Payroll Taxes

• Income Tax Brackets and Rates: A three-bracket system replaces the previous two-bracket system. The new rates are:

  • 35.82% for income up to €38,441
  • 37.48% for income between €38,441 and €76,817
  • 49.50% for income above €76,817

• Tax Credits:

  • The general tax credit decreases to €3,068.
  • The employment tax credit increases to €5,599, subject to a phase-out starting at €43,071.

Social Security Contributions

• Employer Contributions: Rates for 2025 vary and employers will receive official notification of applicable rates.

• Employee Contributions: Remain unchanged at 17.9% for AOW (General Old Age Pensions Act) and 0.1% for ANW (National Survivor Benefits Act).

• Contribution Ceiling: Applicable ceilings are not specified yet.

• Unemployment Fund (Awf):

  • 2.74% for employees with permanent contracts.
  • 7.74% for other employment types.

• Healthcare Insurance Act (Zvw) Levy:

  • Employers contribute 6.51% on wages up to €75,864.
  • Compulsory insured persons with other employment income contribute 5.26% on income up to €75,864.

Other Payroll Updates

• Minimum wage increases to €14.06 per hour.
• Tax-free home office allowance increases to €2.40 per day.
• The low-income benefit (LIV) is abolished.
• The "30% ruling" for incoming employees continues to apply in 2025 and 2026, reverting to a maximum of 27% in 2027.

Self-Employment Regulations

• The enforcement moratorium on false self-employment ends on January 1, 2025.
• The tax authorities will resume full enforcement of regulations regarding self-employment, focusing on payroll tax compliance.
• Retroactive corrections, assessments, and fines may apply in cases of misclassification, with potential joint liability for both the client and the self-employed individual.
• Leniency will be applied in imposing penalties if companies can demonstrate efforts to address pseudo self-employment. However, default penalties can still be imposed.
• Company car usage exceeding 500 kilometers per year for personal purposes incurs an addition to income.
• The corporate tax return deadline for the calendar year is May 31st. An extension can be requested. Companies with broken financial years have deadlines five months after their year-end.

This information is current as of February 5, 2025, and might change due to legal amendments or further government announcements. It's essential to stay updated with official publications and consult with tax professionals for personalized guidance.

In the Netherlands, employers are responsible for deducting various taxes and contributions from employee salaries, including payroll tax, social security contributions, and healthcare contributions. Additionally, certain tax benefits and deductions can apply, impacting the final net pay.

Payroll Tax

• Wage Tax: This is a progressive tax, meaning the rate increases with income. As of 2025, the tax brackets and rates are:
  • Up to €38,441: 35.82%
  • €38,441 to €76,817: 37.48%
  • Above €76,817: 49.50%
• Tax Credits: Employees may be eligible for tax credits that reduce their overall tax burden.
  • The general tax credit in 2025 is €3,068 for incomes up to €24,813, decreasing for higher incomes. The employment tax credit is €5,599, decreasing for taxable profits above €43,071.

Social Security Contributions

• National Insurance: Contributions are levied on income up to €38,441, capped at €10,628 annually. These contributions are not deductible from taxable income.
• Other Social Security: Employers also deduct contributions for other social security programs, such as unemployment insurance and the Work and Development Fund (Werkloosheidsfonds and Ontwikkelingsfonds).

Healthcare Contributions

• Employer Healthcare Contribution: Employers pay an income-dependent contribution towards employee healthcare.
• Employee Healthcare Contribution: A portion is also deducted from the employee's salary.

30% Ruling

• Eligibility: This ruling allows employers to offer a tax-free allowance to eligible expats to compensate for extraterritorial costs. Certain conditions apply, including a minimum salary threshold. The employee should have specific expertise not readily available in the Dutch labor market.
• Changes: As of 2024, the 30% ruling has been scaled back, with a phased approach (30%, 20%, 10%) over a period of time. The cap for the ruling is based on the WNT norm (€246,000 in 2025), resulting in a maximum tax-free reimbursement of €73,800 per year. There are plans to partially reverse this scaling back in 2027, reverting to a 27% ruling.
• Salary Thresholds: For 2025, the general salary threshold is €46,660 (excluding the 30% reimbursement) and €35,468 for certain individuals (excluding the 30% reimbursement).

Work-Related Costs Scheme (WKR)

• The WKR allows employers to provide tax-free benefits to employees, like gym memberships.
• In 2025, the free allowance is 2% of the taxable wage sum up to €400,000, with 1.7% for the portion above €400,000.

Other Deductions

• Deductible Expenses: Certain work-related expenses, such as business travel or moving expenses can often be reimbursed tax-free by the employer.
• Non-Deductible Expenses: Some employer-covered expenses, like certain meals and entertainment, are only partially deductible for tax purposes. The non-deductible portion is 0.4% of the total taxable wages, with a minimum of €5,600.

Deadlines and Procedures

Employers must withhold taxes and contributions and remit them to the Dutch tax authorities according to established deadlines. Payroll tax returns must be filed periodically. Specific regulations and procedures exist for applying for the 30% ruling and managing the WKR.

Other Considerations

• Minimum Wage: Deductions cannot bring an employee's salary below the statutory minimum wage.
• Settlements: Final settlements for terminated employees must include accurate calculation and deduction of taxes and contributions.
• Garnishment: Employers are obliged to comply with court orders regarding wage garnishment.

This information pertains to the 2025 tax year and is current as of February 5, 2025. Tax laws and regulations are subject to change. Always consult with a tax advisor for personalized guidance.

In the Netherlands, Value Added Tax (VAT), known as BTW (Belasting op de Toegevoegde Waarde), is levied on most goods and services.

VAT Rates

• Standard Rate: 21% (applicable to most goods and services). As of January 1, 2025, this rate also applies to certain agricultural products previously taxed at the reduced rate, including non-food cereals and legumes, seedlings, livestock offal, beetroot roots, specific seeds, round wood, straw, animal feed, flax, and wool.
• Reduced Rate: 9% (applicable to specific goods and services such as food, books, public transport, and hotel accommodations).
• Zero Rate: 0% (applicable to international transactions like exports and certain services to non-EU customers).

VAT Exemptions

Certain goods and services are exempt from VAT, including:

• Medical services (consultations, care homes).
• Education.
• Financial services.
• Childcare.
• Home care services.
• Services by composers, writers, and journalists.
• Letting or selling immovable property older than two years.

VAT Registration

• Businesses established in the Netherlands: Mandatory registration if annual turnover exceeds €25,000 (this threshold is expected to be removed by the end of 2024).
• EU-based businesses (distance selling): Mandatory registration if annual sales to the Netherlands exceed €100,000.
• Non-EU businesses: Mandatory registration when starting sales to Dutch customers.

VAT Filing and Payment

• Frequency: Quarterly for most businesses. Monthly filing is required if VAT payable exceeds €15,000 per quarter or if there's a history of late payments. Annual filing is possible if the annual VAT liability is below €1,883 and intra-community transactions are below €10,000, provided the postponed accounting for import VAT hasn't been applied for.
• Deadline: For resident businesses and established foreign businesses: the last working day of the month following the reporting period. For non-resident, non-established businesses: last working day of the second month following the reporting period. Annual returns are due by the last working day of March of the following year.
• Method: VAT returns must be filed electronically via the Dutch Tax and Customs Administration (Belastingdienst) portal.

Intrastat Reporting

Intrastat declarations track the movement of goods between EU member states. While thresholds were removed in 2023, the tax authorities inform taxpayers individually about their reporting obligations.

Other Considerations

• The One-Stop-Shop (OSS) system simplifies VAT reporting for distance selling and digital services to EU consumers. Businesses can register in one EU member state and declare all EU sales through a single return.
• The EU Small Business Scheme (EU-KOR) introduces a VAT exemption for small businesses operating in multiple EU countries, starting January 1, 2025.

Note: This information is current as of February 5, 2025, and may be subject to change. Consult with a tax advisor for personalized advice.

The Netherlands offers various tax incentives for businesses and individuals in 2025. These incentives are designed to stimulate economic activity, promote innovation, and attract foreign investment.

Corporate Tax Incentives

• Participation Exemption: Dividends and capital gains from qualifying shareholdings are 100% exempt. This is particularly attractive for holding companies and European headquarters.
• Fiscal Unity Regime: Dutch corporate groups can consolidate their tax liabilities, streamlining administration and potentially reducing the overall tax burden.
• No Withholding Tax: Generally, no withholding tax is levied on interest and royalty payments made to foreign entities.
• Innovation Box: A special tax regime applies to profits derived from patented intangible assets, offering a reduced effective tax rate of 9%. This incentivizes research and development and intellectual property development within the Netherlands.
• R&D Tax Credit (WBSO): Startups and innovative companies can receive a compensation for wage costs, other costs, and expenditures related to research and development activities. For 2025, the benefit amounts to 50% of the first €380,000 of R&D costs for startups and 36% for other companies, plus 16% of the excess above €380,000.
• Energy Investment Allowance (EIA): Companies investing in energy-efficient technologies and sustainable energy can deduct 40% of the investment costs from their taxable profit, in addition to standard depreciation. The maximum eligible investment is €151,000,000.
• Environmental Investment Allowance (MIA): Companies investing in qualifying environmentally friendly assets can deduct an additional percentage of the investment cost, ranging from 27% to 45% depending on the asset type. The maximum annual investment eligible for MIA is €50,000,000, and each asset must have a minimum investment of €2,500.
• Small-Scale Investment Deduction: This deduction allows companies to deduct a percentage of their investments in assets. The percentage and maximum deduction amount depend on the total value of investments made, with deductions decreasing for investments exceeding certain thresholds.

Individual Tax Incentives and Considerations

• 30% Ruling (Expat Tax Regime): Expatriates recruited from abroad may be eligible for a tax-free allowance of 30% of their taxable salary for the first five years of their employment. This is designed to offset the costs associated with relocating to the Netherlands.
• Tax Relief for Starters (Startersaftrek): New entrepreneurs can deduct an additional €2,123 from their taxable income, on top of the self-employed deduction, for the first three years of their business.
• Tax Credits: Various tax credits are available to reduce the tax burden for individuals, including employment tax credits, general tax credits, and income-dependent combination tax credits. The exact amounts and eligibility criteria vary. Note that the general tax credit has decreased and is capped at €3,068 in 2025. The employment tax credit has increased to €5,599 for 2025.
• Limited Deductions: Compared to some other countries, the Netherlands offers relatively few deductions for individuals in their personal income tax returns. However, some business expenses may be reimbursed tax-free by employers.
• Three Tax Brackets: As of 2025, income tax is calculated based on three tax brackets, with different rates applied to each bracket.

This information is current as of February 5, 2025, and might be subject to change. It is essential to consult with a tax advisor for personalized advice and to stay informed about the latest regulations. The Dutch Tax Administration (Belastingdienst) is the official source for tax information in the Netherlands.