Working in the Netherlands
If your foreign-based company has employees in the Netherlands, you will come across a number of issues, for instance in the areas of tax liability and employee benefits.
Questions that may arise in this context are:
- In which country are your employees liable to tax?
- In which country are social security contributions due (social insurance coverage)?
- Which country’s labour laws apply?
- Are the employees allowed to work in the Netherlands?
- Is your company subject to a registration requirement under the Dutch Placement of Personnel by Intermediaries Act (Dutch acronym: WAADI)?
- Does your company comply with the Dutch Posted Workers in the European Union (Working Conditions) Act?
This memo tells you in general what you need to know. Please remember that every issue is governed by its own rules (treaties, European regulations, national legislation), which adds to the complexity of assessing each issue individually.
To prevent an employee from having to pay tax in two countries, tax treaties have been concluded. These treaties stipulate which country is competent to levy tax at which time. An employee who performs duties in the Netherlands is liable to pay tax in the Netherlands unless he or she spends fewer than 183 days per year in this country. The 183 days are calculated based on all days that the employee was in the country where he or she works, including weekends and leave days. A morning or afternoon counts as a full day.
That said, there are many exceptions to this 183-day rule based on which an employee is effectively liable to pay tax in the Netherlands from day one. The 183-days rule does not apply if:
- the employer who pays the employee’s salary has its registered office in the Netherlands and the salary is not paid by or on behalf of a permanent establishmentthat has its registered office outside the Netherlands; or
- the salary is chargeable to a permanent establishment in the Netherlands.
There may be instances in which the employer does not charge Dutch payroll tax to the employee. In that case, the unwithheld Dutch payroll tax qualifies as taxable income.
An example to illustrate: Heinz works in Germany where he earns a gross monthly salary of € 5,000. His employer withholds € 2,000 per month in payroll tax. Heinz’s net income is € 3,000 per month. Heinz’s employer sends him on a two-week posting in the Netherlands, where he is liable to pay tax from day one. The employer has its accountant calculate the Dutch payroll tax liability and remits this tax in the Netherlands; in this example, the Dutch payroll tax comes to € 500. The employer has agreed with Heinz that this additional payroll tax liability will not be charged to him, for which reason it does not withhold the amount of € 500 from his salary. The final payroll tax liability will increase as a result as tax will be due on the amount of € 500 that was calculated earlier. In other words, the employee benefits expenses will rise for the employer.
Our specialists can provide targeted advisory services to help you keep your employee benefits expenses as low as possible.
If an employee has an A1 certificate, no social security contributions need to be calculated and paid in the Netherlands. The A1 certificate specifies in which country the employee is covered. The employee can apply for the certificate in the country in which he or she resides before starting to work in the Netherlands. If the employee does not have an A1 certificate, social security contributions will have to calculated and he or she will have social insurance coverage in the Netherlands.
Right to work
An employee must be allowed to work in the Netherlands. The following foreign employees have the right to work in the Netherlands:
- employees who are nationals of an EU Member State, except Croatia;
- employees from Switzerland;
- employees with a residence permit stating ‘employment freely permitted’.
Other employees need to arrange for a work permit or a combined residence and work permit. It is fairly simple for an immigrant who has permission to work in a country on the basis of his or her knowledge (a so-called knowledge worker) to be granted the required permits. The procedure is much more cumbersome for other categories.
Dutch Placement of Personnel by Intermediaries Act
The Dutch Placement of Personnel by Intermediaries Act (Dutch acronym: WAADI) prohibits a company from making the services of employees in the Netherlands available for other companies if it does not have the appropriate registration with the Chamber of Commerce. If the operations of a company include making available the services of employees, the company to which the services of these employees are made available is required to check whether the former company has the appropriate registration with the Chamber of Commerce. If these services are not registered appropriately, please point out this oversight to the company and make sure that the registration is amended. If you do not, both your company and the company making the services of employees available will threaten to incur a penalty.
Enforcement of Dutch Posted Workers in the European Union (Working Conditions) Act
The Dutch Posted Workers in the European Union (Working Conditions) Act (Dutch acronym: WagwEU) protects foreign employees who have been seconded to the Netherlands. The seconded employees are entitled to the main employee benefits in the Netherlands with respect to minimum wage, resting hours, safety and security, equal treatment of men and women, and leave days.
We provide comprehensive services in the broad fields of international/ cross-border employment and expats. We are always looking out for your best interests: we help you keep your costs as low as possible and make sure you avoid the risks and pitfalls associated with seconding employees to a foreign country. It goes without saying that we speak your language. Please contact our international advisers by sending an email to firstname.lastname@example.org or use the contact form below.
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