Social

Salaries tax and social insurance contributions

To avoid employees having to a pay a large amount of income tax at the end of the year, their employers withhold salaries tax from their salaries. Salaries tax is regarded as an advance payment of income tax.

Besides salaries tax, national insurance contributions, employee insurance contributions and income-related healthcare insurance contributions are also deducted from employees’ salaries.

Salaries tax and national insurance contributions

Employees have to pay salaries tax on their earnings. An employee is someone who undertakes to work for an employer, where the employer pays the employee a salary and there is a relationship of authority between the employer and the employee. Sometimes a worker does not have an employment contract like an employee, but in other ways his or her relationship with the employer is similar. This is called ‘deemed employment’, and the employer has to withhold tax and contributions from the worker’s pay as if he or she were an employee.

Everyone who lives or works in the Netherlands is covered by the national insurance schemes for state pension (AOW) and surviving dependants (ANW). The contributions are withheld by the employer from employees’ salaries and remitted to the Tax and Customs Administration.

A separate scheme applies to artists and professional athletes.

Salaries tax and national insurance contributions withheld from all income components

Employers must withhold salaries tax and national insurance contributions from all income components paid to employees and remit them to the Tax and Customs Administration. Income components include salary, holiday allowance, overtime pay, end-of-year bonus and benefits in kind (e.g. a company car).

Work-related costs scheme

The work-related costs scheme allows employers to provide some benefits tax free, such as travel allowances, study costs, lunches and Christmas hampers.

Employers may provide such items tax free only if their total value is less than 1.5% of salary costs. If their total value exceeds 1.5%, the employer must pay 80% tax on the excess.

Employee insurance contributions

Employers also remit employee insurance contributions. These contributions pay for the unemployment benefit scheme (WW), the invalidity insurance scheme (WAO) and the work and income (capacity for work) scheme (WIA). Employers do not withhold these contributions from their employees’ salaries but pay them themselves. The government sets the contribution levels twice a year, in January and July.

Annuity exemption for redundancy pay

The annuity exemption for redundancy pay was abolished on 1 January 2014. An annuity is a form of saving or investment in which the beneficiary receives fixed periodic payments. Transitional arrangements are in place for annuities granted before 1 January 2014 that qualified for the annuity exemption for redundancy pay.

The Netherlands has a comprehensive social security system, and some of the more common questions about it, are answered below. Do keep in mind, as with many things, personal circumstances vary, and legislation changes regularly. While the answers below can guide you, it is always recommended to double check how things apply to you personal situation. Particularly if you think you may still qualify for benefits in your country of origin. While all social security and benefits in the Netherlands, apply to people working/living in the country, depending on the employment contract and or conditions, and your country of origin, exceptions may apply.

Compulsory insurance schemes

For those who cannot continue with social security in their original country, there are two kinds of compulsory social insurance schemes:

Volksverzekeringen (national insurance systems) cover all persons legally living in the Netherlands.

Werknemersverzekeringen (employee insurance schemes) cover anyone employed in the Netherlands.

Everyone has to pay for this as long as they live or work in the Netherlands. You are not entitled to get a refund of any of the contributions when you leave the Netherlands.

Contributions for national insurance schemes are income-dependent. Your employer will pay the majority of your contributions for the employee insurance schemes , but you will also pay a proportion, deducted directly from your wage. You will need a Burgerservicenummer –BSN, previously called SoFi number, to register in the financial/tax and social system. This is a unique personal identification number for all communications with the government or with organisations who have a legal obligation to work for the public (e.g. health care organisations).

In order to apply for a BSN, you will have to make an appointment with the Dienst Burgerzaken (registration office) in the gemeente (municipality) in which you live.

EU and EEA-nationals need only to bring their legal ID (passport, European identity card or national identity card from an EU-country) but non-EEA nationals will also need to show a work permit. Also their residence permit should contain a statement that they are allowed to work in the EU or EEA.

There are actually two Dutch Social Security Systems. The first is applicable to the population of the Netherlands in general: National Insurance. The other, Employee Insurance, applies only to those who work in the Netherlands. Read on to find examples and explanations of what both systems do. Depending on where you come from, Dutch social security might not apply to you at all. Our article will help clarify this too!

NATIONAL INSURANCE SCHEMES IN NL

In Dutch, National Insurance schemes are called ‘volksverzekeringen‘. In principle, they cover all persons living or working in the Netherlands.

Here are some examples of Dutch national insurance schemes, and what they mean for those who are covered by them:

• General Old Age Pensions Act(AOW): Entitlement to an old age pension. It will be paid to residents of the Netherlands when they reach the age of 65+
• General Surviving Relatives Act (ANW): Entitlement to benefits payments for widows, widowers or ‘dependent children’, depending on their income
• Long-Term Care Act (WLZ): Financial support for those who need intensive careor supervision, 24/7
• The Health Insurance Act(ZVW): This act declares that everyone who legally resides in the Netherlands, and is subject to the Dutch social security system, is obligated to have health insurance
• Child Benefit Act (AKW – Kinderbijslag): Entitlement to benefit payments for parentswho have children under the age of 18

Please note that contributions for the national insurance schemes are levied on incomes of up to approximately 33,791 euros a year.

EMPLOYEE INSURANCE SCHEMES IN NL

Technically, it is compulsory for anyone employed in the Netherlands to be insured under the Dutch Employee Insurance Schemes. These are referred to as ‘werknemersverzekeringen‘ in the Netherlands.

Here are some of the major employee insurance schemes, and what they do for those who are insured under them:

• Sickness Benefits Act (ZW): Based on this act, an employer is obligated to continue paying his or her employee a percentage of his or her salary, for the first 104 weeks of sickness
• Work and Income According to Labor Capacity Act(WIA): This act was created for those who have been disabled and out of work for more than 104 weeks. It is intended to investigate and calculate an employee’s ‘ability’ to work. The benefit they receive will depend on whether they are deemed to be fully, partially, permanently or temporarily disabled, according to the enquiry carried out under this act
• Disability Insurance Act(WAO): Under this act, employees who are below the pensionable age are entitled to a benefit. They can receive it if they are still at least 15% unfit for work after 52 weeks of being disabled. The amount of the benefit depends on the degree of disability, the last-earned wage and the age of the employee
• Unemployment Insurance Act (WW): Having the insurance this act offers, protects residents of NL against the financial consequences of unemployment

Contributions for Dutch employee insurance schemes are levied by the Dutch tax department.

EXEMPTION FROM DUTCH SOCIAL SECURITY

Under certain circumstances, expats who reside in the Netherlands will not be subject to a Dutch social security system. You are usually not subject to legislation if you:

• Have been posted to the Netherlands from another EU or EEA (European Economic Area) member state, or Switzerland
• Plan to work in the Netherlands for less than six months

However, Dutch social security may still apply to you, if you carry out your work in the

Social Security Treaties

Check out our page on Social Security Regulation in NL for a more detailed discussion on this matter. For now, here are the bullet points:

If the Netherlands has entered into a social security treaty with the country from which you have been posted, said treaty will determine which social security legislation applies to you. 

• You will probably continue to be covered by the social security system of the country from which you have been posted, if you are only in the Netherlands temporarily
• Generally, it is not possible to obtain an exemption from the Dutch social security system, if you have been posted from a country with which the Netherlands has not entered into a social security treaty

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