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If you employ staff in the Netherlands, you are obliged deduct payroll tax from your employees' wages. Payroll tax consists of:
- wage tax (wage withholding tax)
- social security contributions (employee and national insurance contributions)
- premiums for employer insurance
- an income-dependent employer's health care insurance contribution (Health Care Insurance Act contribution).
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. If your company has been involved in fraud or illegal workers, the Dutch Tax and Customs Administration may require from you to submit first-day registrations for new employees for a period of 3 years.
Keep payroll records
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).
Set off VAT payment against payroll tax declaration
Under specific conditions (in Dutch), 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.
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. You can use the payroll tax number when you file your payroll taxes and whenever else you contact the Tax and Customs Administration.
When you register with the Dutch Tax and Customs Administration as a start-up employer, they determine the sector to which you belong within 8 weeks. However, you can appeal against this decision, since the choice of sector determines the premium you have to pay.
Changes in labour and social security law
As of 1 January 2020 changes in labour and social security law will take place. This means you need to prepare. Read our Balance Employment Market Act checklist to make sure your company is ready on time.