Payroll tax and employer registration

If you employ staff in the Netherlands, then you have to deduct payroll tax from your employees' wages. You must pay these payroll taxes to the Dutch tax authorities (file payroll tax returns).

Payroll tax consists of:

• wage tax (wage withholding tax) and national insurance contributions (step 9 Loonbelasting/premie volksverzekeringen berekenen in the Payroll Taxes Handbook, pdf in Dutch)
• social security contributions (consisting of national insurance contributions and employed person's insurance contributions)
• an employer's health care insurance contribution. This contribution depends on the income of the employee. (see also chapter 8 Inkomensafhankelijke bijdrage Zvw berekenen in the Payroll Taxes Handbook, pdf in Dutch).

Register as an employer

Before you employ staff, you must register as an employer with the Netherlands Tax Administration (Belastingdienst). Once you have registered, you will receive:

• a payroll taxes number (loonheffingennummer)
• a payroll tax return letter (aangiftebrief loonheffingen)

If you are required to pay employee insurance contributions you will also receive 

• a letter stating the sector you are active in (the sector you are affiliated with determines the premium you have to pay)
• a notice stating the percentage for the Return-to-Work Fund (Werkhervattingskas, Whk).

You use the payroll tax number when you file your payroll taxes (in Dutch) and whenever else you contact the Tax Administration.

Registered office abroad?

Is your company’s registered office in another country? In some cases, you still have to deduct payroll taxes. In these cases, you must also first register with the Tax Administration.

Paying less wage tax and national insurance contributions

In some cases you do not have to pay the full amount of the wage tax deduction. For example, if your employee carries out research and development work, you may be eligible for the WBSO R&D tax credit. Read more about tax credits in chapter 26 Afdrachtverminderingen of the Payroll Taxes Handbook (Handboek Loonheffingen, pdf, in Dutch).

Check your employee's identity

Upon employment, you ask your employee to provide you with a signed statement that includes data such as name, address, date of birth and citizen service number (burgerservicenummer, BSN). You verify and record each employee’s identity. In the case of a foreign worker, you must also check if they are permitted to work in the Netherlands.

Make sure you have all the necessary information before they start working for you. Are you unable to properly establish the identity of your employee? Or does your employee not give his name, address, place of residence, and social security number? Then you will have to apply the so-called anonymous rate (anoniementarief).

Keep payroll records

You must keep your employees' data, such as their employment contract, in your personnel records. You use part of this data for your payroll records. 

You have to: 

• determine the elements of the employee’s wage (see also chapter 3 Loonadministratie aanleggen in the Payroll Taxes Handbook, pdf in Dutch).
• calculate the correct contributions and taxes
• file a tax return 
• pay what you owe by the due date

For this, you may want to use payroll software or hire a payroll office, accountant, or financial advisor to assist you. You can read more in Chapter 3 Loonadminstratie aanleggen of the Payroll Taxes Handbook (Handboek Loonheffingen, pdf, in Dutch).

Set off VAT payment against payroll tax declaration

Under specific conditions it is possible to set off a VAT payment against a payroll tax declaration (chapter13.4.3 Loonheffingen verrekenen met teruggaaf btw, Handboek Loonheffingen, pdf, in Dutch). You can file a request to do so if:

• you have filed the payroll tax return against which you want to set off the VAT refund on time
• you file your VAT and payroll tax returns in the same period
• you have no outstanding tax debts
• you file your request for offsetting VAT no later than the last date that you would be able to file your payroll tax returns

Use the Dutch-language form Request setting off VAT refund against payroll tax (Loonheffingen verrekening met teruggaaf btw).

Work-related costs scheme: staff allowances

With the work-related costs scheme (werkkostenregeling, WKR) you can reimburse certain expenses (such as travel costs), provide benefits in kind (for example Christmas or birthday presents, or make provisions (for example a company bike or computer) for your employees without tax liability. 

Payroll tax temporary staff or subcontracted work

Do you hire temporary staff through an intermediary, or do you subcontract work to a contractor/subcontractor? The intermediary or contractor/subcontractor must pay the payroll tax for these employees. If they fail to do so, the Tax Administration may hold you liable.

Payments to third parties (UBD)

Do you occasionally hire someone for services or activities (for example a speaker for a meeting or event), or someone who performs odd jobs for cash payment? And is this person is not an entrepreneur or in your (fictitious) employment? Then you must provide information on the amounts paid to third parties (uitbetaalde bedragen aan derden, UBD) to the Netherlands Tax Administration (renseigneringsverplichting, UBD reporting obligation).