If you hire personnel in the Netherlands, or have your foreign employees work in the Netherlands, you need to be aware of your Dutch obligations as an employer. What must you bear in mind? Our Employment Advisory experts discuss several employers’ obligations:
Wage tax and obligation to withhold tax
Social security
Administration duty for employers with an obligation to withhold tax
Would you like to know more about the position of employers with staff in or from abroad? Read our insights about matters such as work permits, the 30% ruling and Dutch labour law.
Obligation to withhold wage tax
If a company has a Dutch or foreign employee perform work in the Netherlands, this may have consequences for both the employee and the employer. The employer may face an obligation to withhold wage tax.
Employer established in the Netherlands
In principle, an employer established in the Netherlands with an employee performing activities for that business is immediately liable to withhold Dutch wage tax for that employee. This is the case if the employee lives in the Netherlands, but (in principle) also if the employee lives abroad but performs work in the Netherlands. An exception may apply if the employee living abroad performs his work almost exclusively outside of the Netherlands and the employee’s income is subject to taxation in another country.
Employer established abroad
An employer established abroad may be liable to withhold tax if activities are performed in the Netherlands. This is the case if the employer:
employs one or more persons whose income is subject to taxation in the Netherlands, and
keeps a payroll administration in the Netherlands with regard to these persons, and
has reported to the Dutch Tax Authorities as a withholding agent.
Or if the employer:
has a permanent establishment for corporate income tax purposes in the Netherlands (or if there is a permanent representative that is resident or established in the Netherlands); or
has a fictitious permanent establishment in the Netherlands.
Please note: a fictitious permanent establishment (‘fictieve vaste inrichting’) may arise as a result of the foreign employer conducting business activities within the framework of an undertaking for a continuous period of at least 30 days, if such work is carried out in, on or above the North Sea extraction area. Additionally, a fictitious permanent establishment arises if activities are performed aimed at the provision of intervention for the benefit of staff, which may also occur intra-company. Your Baker Tilly advisor would be happy to explain this in more detail.
Social security employees
An employee who lives in the Netherlands and performs work here, is generally (mandatorily) subject to Dutch social security legislation. The same is true for an employee who does not live in the Netherlands but does carry out his work in the Netherlands. Based on international rules, this may sometimes be deviated from. In such cases the employer must request the appropriate social security declaration and keep it in the payroll administration.
If an employee is subject to Dutch social security, the employer has obligations with regard to Dutch employee insurance schemes, regardless of where the employer is established.
Obligations for employers with a duty to withhold tax
An employer with a duty to withhold tax has a number of administrative obligations in the Netherlands. The main obligations are as follows.
Payroll administration
In order to pay the correct amount of wage tax and social security contributions, employers are obligated to keep a payroll administration. The employer with a duty to withhold tax must report to the Dutch Tax Authorities as soon as the activities in the Netherlands commence, or as soon as possible after it becomes clear that there is a withholding obligation for wage tax and/or social security. The Dutch Tax Authorities then issue a wage tax number (‘loonheffingennummer’).
Tax return and payment
With this wage tax number, you can file the wage tax return (including social security) and pay the taxes and contributions due. In principle, this is done on a monthly or 4-weekly basis. The Dutch Tax Authorities inform the withholding agent of the filing and payment deadlines. Generally, both the returns and the payments must be received by the Dutch Tax Authorities ultimately on the last day of the month (or 4-weekly period) following the reporting period.
Payslip and annual statement
Employers must provide their employees with a payslip. This should state matters such as an overview of the wages, split into different forms of wages if relevant, and should include what the agreed upon or worked hours of the employee are. The payslip also states possible pension contributions, reimbursements, holiday entitlements and the wage tax and social security contributions withheld. The payslip also includes the personal details of the employee. At the end of the year, the employer must provide the employee with an annual statement. Our advisors would be happy to tell you more about the requirements for payslips and annual statements.
Pay close attention to your employers’ obligations!
If you have employees work in the Netherlands, pay close attention to your obligations as an employer. Our Global Mobility experts would be happy to help you. If you have any questions about withholding obligations, returns or social security, or if you would like to know more about your administrative obligations, please do not hesitate to contact us.
The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.
