Are you working for a foreign employer while residing in the Netherlands? Understanding your tax obligations and exploring the benefits of the 30% ruling can make a significant difference in your financial situation. Taxsight provides insights into the best tax structures and how to apply for available tax benefits as an expat.
When you become a resident of the Netherlands, you are generally required to pay taxes on your worldwide income. This means that your earnings—whether sourced domestically or internationally—could be subject to Dutch taxation. Filing an annual personal income tax return is mandatory if you have taxable income, or if the Dutch tax authorities (Belastingdienst) send you a filing request. However, you may also choose to file voluntarily to claim a potential tax refund.
Working for a foreign employer while living in the Netherlands
Many expats continue working for foreign employers after relocating to the Netherlands. While this arrangement may initially be temporary, some employees remain in this setup for extended periods. Under Dutch tax law, work performed in the Netherlands by a Dutch resident is generally subject to Dutch taxation, even if the employer is based abroad.
If your foreign employer does not set up a tax structure in the Netherlands, you will need to settle your taxes via your annual tax return. However, setting up a structured payroll system in the Netherlands can simplify compliance and prevent unexpected tax burdens.
Payroll-only structure for foreign employers
To streamline tax compliance, a foreign employer can establish a Dutch payroll system. This payroll-only structure involves registering with the Dutch tax authorities and becoming a withholding agent for payroll tax and social security contributions.
In the Netherlands, national insurance contributions are integrated into the lower income tax bracket (approximately 37%). The maximum annual national insurance contribution is around €10,500, primarily funding the Dutch state pension system. If an employer registers for payroll in the Netherlands, these contributions are deducted from the gross salary of the employee, avoiding unexpected tax liabilities during the annual filing.
The 2024 income tax brackets for Box 1 (employment income) are:
- Up to €75,518: 36.97%
- Above €75,518: 49.50%
By withholding taxes monthly through a payroll structure, employees avoid large tax payments when filing their annual returns. This setup benefits both employers and employees, ensuring proper tax compliance.
Employer social security contributions
In addition to withholding payroll tax, foreign employers must also pay social security contributions if their employees are covered under the Dutch social security system. These employer contributions amount to approximately 18% of the gross taxable salary, with a maximum annual cost of around €10,000 per employee.
This employer contribution helps fund benefits such as:
- Long-term disability insurance
- Unemployment benefits
- Government healthcare insurance contributions
Applying for the 30% ruling
One of the most attractive tax benefits for expats in the Netherlands is the 30% ruling, which allows eligible employees to receive 30% of their salary tax-free for a limited period. The benefit is available for a maximum of five years, although this period is reduced if the employee had previous stays in the Netherlands.
As of 2024, the 30% ruling applies to a maximum annual salary of approximately €233,000. If an employee earns more, the excess amount will not qualify for the tax-free benefit.
New 2024 regulations for the 30% ruling
The Dutch government has introduced a phased reduction for the 30% ruling starting in 2024:
- First 20 months: 30% of salary is tax-free
- Next 20 months: 20% of salary is tax-free
- Final 20 months: 10% of salary is tax-free
Expats who qualified for the 30% ruling before 2024 may still benefit from transitional regulations, which will fully apply starting in 2027.
The 30% ruling and partial non-resident taxpayer status
Expats benefiting from the 30% ruling can opt for partial non-resident taxpayer status, which has significant implications for Box 2 and Box 3 taxation.
Box 2:
Employees who hold at least 5% shares in a foreign company may be exempt from Dutch taxation on dividend income, provided the company is not based in the Netherlands. However, from 2025, dividends will need to be reported in Box 2, even under the 30% ruling. Expats who had the ruling in place before 2024 can use transitional arrangements until 2027.
Box 3
Expats with partial non-resident taxpayer status are generally not taxed on savings and investments (Box 3), except for Dutch real estate that is not their primary residence. However, the 2024 tax changes require that starting in 2025, employees under the 30% ruling declare their foreign assets as part of their Dutch tax return. Again, a transitional period applies for those who had the ruling in place before 2024.
Get expert guidance on your tax situation
Navigating Dutch tax regulations as an expat can be complex, especially when working for a foreign employer. Whether you need assistance with tax structuring, payroll registration, or applying for the 30% ruling, Taxsight is here to help.
With years of expertise in international tax matters, Taxsight provides tailored solutions to ensure compliance and optimize your tax position. Contact our team today via +31 (20) 261 3221 or email us at info@taxsight.nl for professional guidance on your tax obligations in the Netherlands.
