The social security scheme in the Netherlands is divided in public insurances and employee insurances. The public insurances are included in the wage tax rates, so by withheld on wage tax the employee pays this part itself. The employee insurances (like unemployment insurance) are almost completely payed by employers in the Netherlands. In total, these costs are about 20% extra on gross wage. This will stop on a wage above € 55.000. This is also the maximum insured amount for an (ex)employee.
An employer is often also liable to take out pension insurance for all employees. The cost of this varies often between 5 and 15% of paid salaries.
The right to perform gainful employment in the Netherlands is determined according to citizenship as follows:
Citizens of the European Union, Norway, Iceland, Liechtenstein and Switzerland may work in the Netherlands without a worker’s residence permit.
The citizens of a member state of the European Economic Area (EEA) are entitled to move to another member state to work or to seek work. The free movement of workers is a basic right, which implies the right to work in some other EEA country on the same conditions that are applied to the host country’s own citizens.
Work in another EU country gives the citizens of the Union right to reside in the country in question. If you stay in The Netherlands for less than four months, you have to register as a non-resident. If you stay in the Netherlands for over four months, you should register as a resident of the municipality were you live.
The citizens of countries outside the EEA need a worker’s residence permit to work in the Netherlands. The permit is temporary. Additional information is available on the pages of www.rijksoverheid.nl.
If a person stays in the Netherlands only for six months or less, and a company from another country than the Netherlands is paying his salary, he will usually not have to pay tax on his wages in the Netherlands, when a tax treaty applies. Of course, the relevant treaty must always be checked.
If the person stays in the Netherlands for longer than six months, he will be paying tax on his salaries in the Netherlands. It does not make a difference if his employer is Dutch or foreign or if he receives a part of his salary from a Dutch employer and another part from a foreign employer.
The employer have to pay also social insurance premiums (approx. 20%) unless the person has the certificate E 101/A1 of a posted employee. For posted employees, social security insurance is sorted in country of origin.
Incoming employees can, together with their employer, request for the very advantageous 30%-rule for eight years. This means that 30% of the salary remains untaxed, when they change a part of the gross salary in an exempted cost reimbursement. When a net salary is agreed, the 30%-rule benefits the employer.
Incoming employees can also make a choice in their income tax return so that have to pay less income tax on their foreign assets (including equity interests greater than 5%).
A usual resident in the Netherlands is obliged by law to be insured for medical healthcare. There is a mandatory basic insurance limit, which must be taken from an insurer. There is also a mandatory insurance for long-term care. This is financed by the compulsory contributions of Dutch residents. A part of the contribution is calculated within the income tax payments (social contributions), a part is payed directly to the insurer and a part is contributed by employers.
If a non-resident is posted for work in the Netherlands, it is possible that the Dutch social security scheme is appointed. If this is the case, the obligation to insure for medical healthcare is a fact too.
The wage withholding tax is an advance tax payment on the employee’s income tax. The withheld of this wage tax is a combination of tax and social contributions. This rate is progressive up to 51.95%. The complexity is largely due to the designation of taxable components – or not – and applying deductions. For extra payments, there is also an additional wage tax withheld, based on the progressive rate that is estimated for that year.
The mandatory procedure for every employer in the Netherlands is that periodic (mostly monthly) a declaration is sent to DTA with periodic information about this employees. An administration is being established for every employee, that is the source for any future benefits to this employee. In addition to this declarations, there will also be a calculation of the payments by employer to DTA because of its withholds, contributions, premiums and WKR tax. Immediate fines will result if this declarations are false or not declared in time.