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                                                        Taxes

Your monthly pay slip and annual personal tax forms in the Netherlands can be difficult to decipher due to the complicated tax and social cost structure (and they are all written in Dutch).

Here is a brief explanation of taxes in the Netherlands :-

Foreign Employees: The 30% ruling
For foreign employees, who are temporarily assigned to a post in the Netherlands, a special allowance may be granted. This was previously the 35% allowance and from 2001 is the 30% allowance.
If certain requirements are met, the Tax Authorities may allow a Dutch employer to pay 30% of the monthly salary free of tax. The basis for calculating the 30% allowance is to multiply the salary by a factor of 70/100.)

You should reside outside the Netherlands and be brought to the Netherlands due to the shortage of Dutch nationals with specialist and/or scarce skills
Have achieved a higher level of education and or years in your field and a minimum 2.5 years in the industry.
If you already have the 30% rule you should be continually employed within the Netherlands. if you remain in the Netherlands seeking work and are unemployed for more than 3 months you risk losing the ruling. However if you were employed outside of the Netherlands and have new skills, the ruling can still be applied for on your return.
The 30% ruling applies for a maximum of 10 years, granted initially for 5 years. You are required to re-apply for a further 5 years.
Each new employer must re-apply for the 30% tax allowance.
You must be able to produce your SOFI number and a pay slip or your P60 (end of year earnings summary) for proving earnings comparisons.
The regulations have been tightened in recent years, be sure the company making the application are experienced in completing the application properly.

See: www.workpermit.com


Income Tax
There are 3 income boxes used when calculating income tax.
The most important is Box 1.
Box 1 is the income from your salary, pension, company car, alimony and own house.
Box 2 is the income from company shares and profits (fixed rate of 25%).
Box 3 is the income from savings and investments (fixed rate of 30%).

As a deduction there is a basic personal credit of €1053 and a working person's credit of €875.
The tax in Box 1 is levied at a progressive rate with four tax brackets.

  1. Up to €14,362 taxable income = 32.55%

  2. €14,362 - €26,490 = 36.85%

  3. €26,490 - €45132 = 42.00%

  4. €45,132 and above = 52.00%

The first two brackets consist of both tax and social insurance contributions, while the other two consist solely of tax.

Tax returns and assessments
Everyone has the right to claim money back from the taxman.
Some points of note are given below: -

Probation and notice periods:

  • A one month probation period is the usual, however companies can ask for a two month period.
  • Within the probation period either party can give notice with immediate effect (usually put in writing).
  • Once the probation period has passed, the contract of employment runs its course with a notice period of 1 or 2 months. Where more than one month's notice is required, the employer must always give double the notice period to that of the employee.

Mortgage interest tax relief. Social insurance contributions

As well as paying tax everyone pays social insurance contributions on income. Some of these contributions have a maximum value, while others are levied as a percentage of income.
Employers deduct these contributions from wages or salaries at the same time as the wage tax.
Social insurance schemes apply to the whole population, so everyone can make use of the facilities paid for with these contributions.

There are four social insurance schemes:

  • The General Invalidity Benefits (AAW): for people who are unable to work as a result of an illness or handicap receive an AAW benefit.
  • The Widows' and Orphans' Benefits Act (AWW): for people who have been widowed or orphaned.
  • The General Old Age Pensions Act (AOW): for everyone who reaches the age of 65.
  • The Exceptional Medical Expenses Act (AWBZ): for people who incur medical expenses which are not reimbursed by a health insurance fund or a private medical insurance scheme)