Tax is a mandatory financial contribution the government imposes on individuals, businesses, or other entities, typically based on income, profits, or imposed to fund public services and government operations. Tax is important because it serves as the primary source of revenue for governments to finance public infrastructure, education, healthcare, social programs, and other essential services that benefit society as a whole. There are different types, such as income tax, payroll tax, and value-added tax. Each country's tax system differs due to regulations. As Unusual Payroll, which also provides tax consultancy services to companies in the Netherlands and specialises in payroll services, in this blog, we will examine the Dutch tax system in general terms and explore the different types of taxes in the Netherlands. Then, we will touch on tax liabilities for highly skilled migrants, the 30% Ruling and after-tax salary calculation.
The general framework of the Dutch tax system: different types of taxes in the Netherlands
Regarding the general framework of the Dutch tax system, there are different types of taxes in the Netherlands. Being a Dutch citizen or a foreign national working in the Netherlands makes you liable to be a taxpayer in the Netherlands. Thus, if you earn money while living in the Netherlands, you must pay taxes in the Netherlands. The organisation responsible for collecting taxes in the Netherlands is called the Belastingdienst. The basic taxes in the Netherlands are listed as follows:
- Income tax (inkomstenbelasting): Those who work and earn money in the Netherlands must pay tax on their income. Independent workers and freelancers in the Netherlands can pay their income taxes with the support of a tax advisor in the Netherlands or by filing their annual Dutch tax returns online. If you work for a company based in the Netherlands, your income tax is automatically deducted from your salary. This is also known as payroll tax and is included in payroll tax.
- Payroll tax (loonheffing): Payroll tax is the tax deducted by the employer from the employee's gross salary and includes taxes and contributions such as income tax, national insurance premiums, employee insurance premiums, income-related contributions under the Health Insurance Act (Zvw). This tax is deducted from the employee's salary every month. This makes the difference between gross salary, including taxes, and net salary after taxes are deducted.
- VAT (BTW / Belasting Toegevoegde Waarde): The Dutch tax office also collects value-added tax, which must be added to the price of all businesses' goods and services. There are different VAT rates for products and services, including 0%, 9% and 21%, the most common being 21%.
Income tax and after-tax salary calculation for Dutch highly skilled migrants
The 30% Ruling in the Netherlands is a tax advantage available to highly skilled migrants who are employed by a Dutch employer. This scheme allows eligible expatriate employees to receive a tax-free reimbursement of up to 30% of their gross salary, effectively reducing their taxable income. To qualify for the 30% Ruling, several conditions must be met, including having specific skills or expertise, meeting income requirements, and not having lived within 150 kilometres of the Dutch border before starting work in the Netherlands. Companies based in the Netherlands can employ their foreign employees by sponsoring them, or they can also get help from business partners that offer payroll services, such as Unusual Payroll, based in the Netherlands.
Should highly skilled migrants file tax returns in the Netherlands?
Even though income tax is deducted from your salary, you must file an annual tax return in the Netherlands. Those who live and work in the Netherlands often receive a letter asking them to fill out a tax return in January in the Netherlands, whose fiscal year runs from January 1 to December 31.
Box system in the Dutch tax return
The tax system in the Netherlands is not limited to those listed above. The Netherlands uses the box system to describe its tax system and categorise forms of income. Taxes for income, such as salaries and earnings from work, are included in Box 1. Box 2 covers capital gains and income from substantial interests, such as dividends. Box 3 describes taxes on stocks and shares, bank or savings accounts, a second home, or investment property. Tax rates for these boxes vary and may be updated annually.
Place foreign talent in the Netherlands with Unusual Payroll
Unusual Payroll offers tailored solutions to businesses that want to place highly skilled migrants in the Netherlands and benefit from the 30% Ruling. Our comprehensive Payroll Services at affordable prices include submitting employee and employer tax returns and social security forms and researching and applying for tax incentives such as the 30% Ruling. If you would like to get support from a professional team with international experience while navigating Dutch regulations, contact Unusual Payroll today.
