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Before you can employ staff, you must register as an employer with the Dutch Tax and Customs Administration. You will then receive a payroll tax number and a number of forms you have to fill in. You use the payroll tax number for submitting payroll tax returns and for contact with the Dutch Tax and Customs Administration. If your company has been involved in fraud or illegal workers, the Dutch Tax and Customs Administration may require from you to submit so-called first-day notifications for new employees for a period of 3 years. If you hire someone from abroad, always make sure they are entitled to work in the Netherlands.
Foreign companies: payroll tax and registration
As a foreign company in the Netherlands, you are obliged to register as an employer and deduct payroll tax from your employees' wages if:
- your company has its registered office in the Netherlands
- you have a permanent establishment in the Netherlands
- you post, hire out or second personnel in or to the Netherlands
- your employee works on the Dutch continental shelf
- your employee falls under the national insurance schemes of the Netherlands
In some cases, you are obliged to deduct payroll tax even if your company has its registered office in another country.
Payroll tax elements
Payroll tax consists of:
- wage tax (wage withholding tax)
- social security contributions (employee and national insurance contributions)
- an income-dependent employer's health care insurance contribution (Health Care Insurance Act contribution).
With regard to the employee and national insurance contributions you pay various premiums: for unemployment, occupational disability and sickness. You also pay a sector fund premium: a contribution towards unemployment costs in the sector you are affiliated with. When you register with the Dutch Tax and Customs Administration as a start-up employer, they determine the sector to which they think you belong. However, you can appeal against this decision, since the choice of sector determines the premium you have to pay.
You must keep your employees' data, such as their contract of employment, in your personnel records. You use part of this data for your payroll records. You determine the elements of the employee’s wage, calculate the correct contributions and taxes, file a tax return and 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.
The Payroll Taxes Handbook (in Dutch), issued by the Dutch Tax and Customs Administration, provides you with everything you need to know about payroll tax. For instance, the handbook contains payroll tax and national insurance rates tables as well as a guide on how to calculate payroll tax (step 7 Handbook).
Check your employee's identity
Your employee provides you with a signed statement that includes data such as name, address, date of birth and citizen service number (burgerservicenummer, BSN) or tax and social insurance number (sofinummer). You verify and record each employee’s identity. If verification of the employee’s identity is not, or not completely, possible, you will have to apply the so-called anonymous rate (anoniementarief). In the case of a foreign worker, you must also check whether they are permitted to work in the Netherlands. Do make sure you have all the necessary information before they start working for you.
Setting off VAT payment against payroll tax declaration
Under specific conditions, it is possible to set off a VAT payment against a payroll tax declaration. To do so, you must use the (Dutch-language) form Request setting off VAT refund against payroll tax (Loonheffingen verrekening met teruggaaf btw).
Payroll tax temporary staff or subcontracted work
If you hire temporary staff through an intermediary or subcontract work to a contractor/subcontractor, the intermediary or contractor/subcontractor must pay the payroll tax for these staff. If they fail to do so, the Dutch Tax and Customs Administration may hold you liable.