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The Netherlands – Taxation of international executives

Taxation of international executives.

Taxation of international executives.

Overview and Introduction

Residents are subject to Dutch income tax on their worldwide compensation. If any of the compensation is attributable to services performed outside the Netherlands and is subject to tax treaty protection, relief from double taxation is available. In case no treaty is applicable tax relief may be available based on national tax law if certain conditions are met.

Non-residents are generally subject to Dutch income tax on Dutch-source income such as real estate and on compensation attributable to services actually performed in the Netherlands. This latter rule, however, does not apply to directors and supervisory board members of Dutch companies; they are generally taxed for their full directors’ remuneration from the Dutch company.

The official currency of the Netherlands is the Euro (EUR).

Herein, the host country/jurisdiction refers to the country/jurisdiction to which the employee is assigned. The home country/jurisdiction refers to the country/jurisdiction where the assignee lives when they are not on assignment.

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Income Tax

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

1 May of the year subsequent to the tax year.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in the Netherlands?

Residents

On entering the Netherlands, the employee must register as a resident in the municipality where they will live if the expected stay in the Netherlands exceeds 4 months. Subsequently, a National Identification Number/”BSN” (Burgerservicenummer) is granted by the municipality.

Spouses are not taxed jointly; each individual is treated as a separate taxpayer for their personal income (such as employment income). In principle, the non-personal income is taxed separately on the spouse who is the beneficial owner of the income. However, spouses are allowed to divide their non-personal income between them as they choose to, as long as all the income is reported. The income will be taxed with the spouse to whom the income has been attributed. Non-personal income of minors is attributed to the parents.

Returns must normally be filed by 1 May following the end of the tax year. Returns prepared by a registered tax professional are generally covered by a tax return extension ruling.

If the tax authorities have not issued an individual income tax return form, the taxpayer may have to request one. This is the case if personal income tax is payable by the taxpayer.

Based on the return, the tax authorities will issue an assessment taking into account any Dutch wage tax withheld during the year. It is possible to file an objection against the final assessment within 6 weeks from the date of issue of the assessment.

Married couples are tax partners, yet file tax returns as separate individuals. Unmarried couples living together at the same address will, under certain conditions, also be treated as tax partners. Although tax partners will be taxed separately, certain income components can be taxed more tax efficiently due to the possibility to divide non-personal income between them. The non-working tax partner of a working tax partner can, in principle, claim 13.5 percent of the general tax credit (maximum EUR2,837). If the non-working tax partner was born before 1 January 1963, the full general tax credit can, in principle, be claimed.

Non-residents

Non-residents should also obtain a National Identification Number. If the employee has less than 4 months housing available in the Netherlands they will have to obtain a National Identification Number by way of an RNI registration at an RNI Desk. Nineteen Dutch municipalities have an RNI desk: Alkmaar, Almelo, Amsterdam, Breda, Den Haag, Doetinchem, Eindhoven, Goes, Groningen, Heerlen, Leeuwarden, Leiden, Nijmegen, Rotterdam, Terneuzen, Utrecht, Venlo, Westland and Zwolle. If a non-resident employee has housing available for more than 4 months the employee must generally register as a resident in the municipality.

Non-resident spouses are not considered tax partners and are therefore not allowed to divide their non-personal income between them. However, non-residents who are residents of an EU or EEA Member State, Switzerland, or one of the BES islands, may receive the same tax treatment as that of residents if they pay tax in the Netherlands on more than 90 percent of their worldwide income and can submit a personal income statement from the tax authorities of the state of residence. These qualifying non-residents will only be taxed on their Dutch income, and are, in principle, entitled to the same deductions and tax credits as resident taxpayers. Pro-rated deductions may be available to non-residents of one of the before mentioned countries/jurisdictions if certain conditions are met. One of the conditions is that more than 90 percent of their worldwide income is subject to tax in two or more countries/jurisdictions other than the state of residence.

Tax rates

What are the current income tax rates for residents and non-residents in the Netherlands?

Residents

Tax is calculated by applying a progressive tax rate schedule to taxable income. The income tax rates are as follows.

Box 1

Income tax table for 2021

Taxable income bracket

Income tax rate

Social security tax rate

Bracket

EUR

EUR

Percent

Percent

1

0

35,129

9.45

27.65

2

35,129

68,507

37.10

0.00

3

68,507

Over

49.50

0.00

 

These figures apply on those who haven’t reached the (state) pensionable age in 2021 yet (2021: 66 years and 4 months).

Box 2

A flat tax rate of 26.90 percent is applicable.

Box 3

A flat tax rate of 31 percent is applicable on deemed income from savings and investments. The deemed income depends on the total value of assets and liabilities on 1 January of the tax year and is calculated as follows.

Bracket

Taxable base income from savings and investments *

Deemed income percentage: 0.03%

Deemed income percentage: 5.69%

1

Until EUR 50,000

67%

33%

2

EUR 50,000– EUR 950,000

21%

79%

3

As from EUR 950,000

0%

100%

 

*After deduction of the exempted amount of EUR 50,000.

Non-Residents

Tax is calculated by applying a progressive tax rate schedule to taxable income. The income tax rates are as follows.

Box 1

Income tax table for 2021

Taxable income bracket

Income tax rate

Social security tax rate

Bracket

EUR

EUR

Percent

Percent

1

0

35,129

9.45

27.65

2

35,129

68,507

37.10

0.00

3

68,507

Over

49.50

0.00

 

These figures apply on those who haven’t reached the (state) pensionable age in 2021 yet (2021: 66 years and 4 months).

Box 2

A flat tax rate of 26.90 percent is applicable.

Box 3

A flat tax rate of 31 percent is applicable on deemed income from savings and investments. The deemed income depends on the total value of assets and liabilities on 1 January of the tax year and is calculated as follows.

Bracket

Taxable base income from savings and investments *

Deemed income percentage: 0.03%

Deemed income percentage: 5.69%

1

Until EUR 50,000

67%

33%

2

EUR 50,000– EUR 950,000

21%

79%

3

As from EUR 950,000

0%

100%

*After deduction of the exempted amount of EUR 50,000.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of the Netherlands?

Residency is determined on the facts of each case. The following facts are taken into account (not limitative):

  • the nature of the stay in the Netherlands
  • the length of stay
  • where the family lives
  • the individual’s center of economic interests
  • the individual’s intentions
  • whether or not the individual is registered in a municipal register
  • the place where bank accounts are held
  • the place where the person’s assets are located
  • the terms of their employment.

The tax courts look at whether there are durable ties of a personal nature with the Netherlands. The term durable does not mean permanent; the closeness of the tie is more important. Ties of a personal nature exclude pure business considerations; personal circumstances, such as the maintenance of an abode, play a more defining role. Residence abroad does not, in itself, exclude the possibility of being considered a tax resident in the Netherlands. However, dual residence resulting in double taxation may be resolved under the terms of a particular tax treaty.

If a resident leaves the Netherlands and returns within a year, they remain a Dutch tax resident, unless they are considered a tax resident of another country/jurisdiction, as interpreted by Dutch and foreign law. If they are subject to taxes as resident in a EU member state or a country/jurisdiction with which the Netherlands has a tax treaty with an agreement about the exchange of information and that country/jurisdiction has comparable tax bases as the Netherlands or if they are subject to the income tax as a resident of Bonaire, Saba or Saint Eustatius, they will not be considered a Dutch tax resident.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country/jurisdiction before their assignment begins?

The assignee might be considered a resident of the Netherlands as of the date of entry.

Termination of residence

Are there any tax compliance requirements when leaving the Netherlands?

There are no special procedures for terminating tax residence in the Netherlands. However, individuals should deregister from the municipal register before they leave the country/jurisdiction.

What if the assignee comes back for a trip after residency has terminated?

In principle, no consequences.

Communication between immigration and taxation authorities

Do the immigration authorities in the Netherlands provide information to the local taxation authorities regarding when a person enters or leaves the Netherlands?

No. However, in the case where a person registers or deregisters with the local town hall, such registration or deregistration is shared with the tax authorities.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

This is possible; for instance, if the assignee receives income relating to the employment in the Netherlands or if the assignee still has a property in the Netherlands.

Economic employer approach

Do the tax authorities in the Netherlands adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the tax authorities in the Netherlands considering the adoption of this interpretation of economic employer in the future?

Yes, the Dutch Supreme Court has adopted an economic employer approach for the interpretation of the term employer. The Supreme Court has ruled that the host entity is considered as the employer for treaty purposes if the following conditions are met.

  • The host entity holds a position of authority over the assignee.
  • The host country/jurisdiction entity bears the costs; associated employment expenses are specifically and individually traceable recharged to the host entity.
  • The risks and benefits of the duties performed by the assignee are attributable to the host entity.

De minimus number of days

Are there a de minimus number of days before the local tax authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

No, although under certain circumstances an exemption, based on a Decree from the Minister of Finance, can be applied if an individual works for not more than 60 days in a 12 month rolling period in the Netherlands.

Types of taxable compensation

What categories are subject to income tax in general situations?

Under the income tax regime income is divided into three separate boxes, each of which is governed by its own rules.

  • Box 1 (living and working) covers business and employment income and income from the main private residence.
  • Box 2 (substantial interest) includes income and gains from substantial shareholdings.
  • Box 3 (savings and investment) covers income from capital.

The three boxes exist independently of each other. This means that losses from one box cannot be offset against income from another box. An exception is made for losses from Box 2. Under certain conditions these can be converted into a tax credit in Box 1.

In Box 1, employment income is taxed. This includes all employment income, such as wages, salaries, pensions, and benefits-in-kind. This income is generally subject to wage tax withholding. In general, this may be credited in determining the final income tax liability or refund. Deductions for employment expenses are not allowed, apart from a limited deduction for commuting by public transport (such as bus or train).

Under the work-related costs rules, all reimbursements and provisions paid to employees and former employees as well as any items made available to them are treated as salary. The employer can choose to designate, as part of a final levy, the reimbursements and provisions paid and the items made available, with the exception of some items such as the company car made available to the employee, monetary penalties, such as traffic fines, and accommodation. If a salary component is designated as part of the final levy, it is no longer taxed by way of the employee’s payroll slip. The employer will subsequently have to determine whether payroll tax on the designated items must be remitted by way of the final levy, for which a fixed exemption of 3.0 percent on the first EUR400,000 of the payroll for tax purposes and 1.18 percent of the payroll for tax purposes over EUR400,000 applies. To some designated items a specific exemption, nil value or fixed value applies. If the fixed exemption is exceeded, then the employer must remit payroll tax of 80 percent on the excess by way of the final levy.

The taxable benefit of the use of a company car for private purposes is set at 22 percent of the list price (unless certain environmental requirements are met in which case the percentage is 12 insofar the list price does not exceed EUR40,000 – this restriction does not apply to cars that run on hydrogen or cars that are powered by solar cells). This taxable benefit must be taken into account in the payroll.

Contributions by employers to qualifying employer pension schemes are not taxable. Contributions from employees to such schemes are in principle tax deductible, if the employer withholds these contributions. Pension benefits paid out under the scheme are, conversely, taxable. Non-Dutch pension schemes are generally not considered as qualifying pension schemes. As a result, the employee’s contributions are not considered tax deductible and the employer’s contributions are considered taxable. It is possible to request the Dutch Tax Authorities to consider the non-Dutch pension scheme as a qualifying pension scheme for a maximum period of 60 months if certain conditions are met (a period of 120 months under certain tax treaties).

In addition, Box 1 covers income from the primary residence. The deemed income on the primary residence depends on the assessed value of the property. Mortgage interest payments are tax deductible up to 30 years if certain conditions are met. Mortgages taken out on or after 1 January 2013, must, in principle, be fully repaid within a maximum period of 360 months based on an annuity or linear repayment scheme. If the income from the primary residence is negative (deemed income minus mortgage payments), this loss can be offset against other income covered by Box 1, which is taxed at a progressive rate.

Capital gains taxes are not applicable, unless there is a substantial interest in a company (Box 2 income). Box 3 taxes capital and investments. The taxable income is determined on the basis of a presumptive, that is, deemed return on capital. The deemed income is taxed at 31 percent.

Resident taxpayers are subject to income tax on their worldwide income.

Non-resident taxpayers are subject to Dutch tax on Dutch-source income. Basically, only a substantial interest in a Dutch-based company, income from Dutch real estate (and directly or indirectly related rights) and from profit shares in a Dutch business (other than when derived from securities or employment services) will be taken into account for Box 2 and 3.

Intra-group statutory directors

Will a non-resident of the Netherlands who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in the Netherlands) trigger a personal tax liability in the Netherlands, even though no separate director's fee/remuneration is paid for their duties as a board member?

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in the Netherlands?

If an individual does not receive a remuneration in their capacity as statutory director of the company situated in the Netherlands, the position itself does not trigger a personal income tax obligation, irrespective of whether or not the individual is physically present at the board meetings in the Netherlands.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in the Netherlands (i.e. as a general management fee where the duties rendered as a board member is included)?

The cost recharge might indicate that a part of the remuneration received by the individual should be considered to be received in the capacity as statutory director.

The main question should be if a remuneration should be paid/allocated to the duties of the statutory director.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

Insofar an individual receives a fee/remuneration in the capacity as statutory director and the Netherlands has levy rights based on the applicable tax treaty, the taxable income should be calculated according to Dutch wage tax law (same tax rates apply as for employees). In principle, the Dutch company from which an individual is statutory executive director, is considered as the wage tax withholding agent and should run a Dutch payroll administration. This is not applicable to non-executive directors (commissioners/supervisory board members), unless the company and individual choose to do so (opting-in).

Tax-exempt income

Are there any areas of income that are exempt from taxation in the Netherlands? If so, please provide a general definition of these areas.

In Box 1, employment income or certain costs can be paid by the employer (partly) tax-free under strict conditions, for instance a relocation allowance and extraterritorial costs.

In Box 3, certain goods for personal use are not considered assets to include in the net capital in Box 3. Capital gains from assets covered by Box 3 are not taxable, because the deemed income is taxable and not the actual income/gain. A capital gain resulting from the sale of a primary residence (Box 1) is not subject to income tax either.

Expatriate concessions

Are there any concessions made for expatriates in the Netherlands?

30 percent ruling

The Netherlands has a special tax regime for expatriates, the so-called 30 percent ruling.

According to the ruling, the employer may pay the employee a tax-free allowance that does not exceed 30 percent of their total taxable remuneration. This allowance should cover the employee’s extraterritorial costs the employee incurs as a result of their employment in the Netherlands.

In addition, the employer may reimburse the fees for the employee’s children to attend an international school (or international department of a local school) tax-free.

Rulings for employments with a commencement date before 1 January 2019 have a maximum duration of 8 years and a commencement date before 1 January 2012 have a maximum duration of 10 years. Per 1 January 2019 the maximum period for which the 30 percent ruling is granted is shortened from 8 to 5 years. The new legislation also applies to employees already using the 30 percent ruling on 1 January 2019. However, a transition period is implemented for those employees of whom the 30 percent ruling will end in the period between 1 January 2019 and 31 December 2020. This transition period implies that those employees can benefit from the 30 percent ruling up until 31 December 2020, insofar the maximum period of the 30 percent ruling based on the legislation that was applicable on 31 December 2018 has not already expired.

Periods of earlier employment or stay in the Netherlands within the reference period of 25 years will reduce the duration of the 30 percent ruling if these periods exceed certain thresholds.

Employees with the Dutch nationality may also qualify for the 30 percent ruling provided they meet the legal requirements.

In order to qualify for the 30 percent ruling, the following conditions have to be met in general. 

  • The employee has specific expertise, which is scarce or not available on the Dutch labor market. 
  • The employee has been recruited from abroad. 
  • The employer is (or is appointed as) a Dutch wage tax-withholding agent.

Specific expertise and scarcity criterion

In order for a specific expertise to be proven, only the salary will be assessed. The converted annual salary for tax purposes in the Netherlands must be at least EUR38,961, excluding the untaxed 30 percent allowance. This is equal to a gross salary of EUR55,658 including 30 percent allowance. A reduced salary threshold of EUR29,616 will apply to masters up to the age of 30 who have been recruited from abroad; this is equal to EUR42,308 including 30 percent allowance. Academics are exempt from the salary threshold. The amounts are index- linked and will be revised annually. It is allowed to grant a lower percentage as long as the taxable salary at least amounts to EUR38,961 resp. EUR29,616.

In addition to the specific expertise criterion, also a scarcity criterion applies. The specific expertise must be scarce or not available on the Dutch labor market. However, the Deputy Minister of Finance has indicated that scarcity will only be assessed in exceptional situations. One of the professional groups that will be assessed on the scarcity criterion is that of professional football players.

Recruited from abroad

In principle, the employee must have been recruited from abroad in order to qualify for the 30 percent ruling. Immediately prior to employment in the Netherlands, the employee must have resided outside a 150 kilometer radius of the Dutch border for two-third of a 24 month period. This condition will not apply to employees who previously stayed in the Netherlands and who meet the 150 kilometer test when they first arrived for their employment or assignment and this employment or assignment commenced less than 8 years ago. For doctoral students, the period of their doctoral research will not be taken into account when assessing whether an employee is recruited from outside the Netherlands. As long as a doctoral student resided outside the 150 kilometer boundary before commencing their doctoral research, they will be eligible for the 30 percent ruling if their employment in the Netherlands commences within 1 year after obtaining the doctoral degree.

Meijburg & Co in the Netherlands has a special agreement with the Dutch Tax Authorities based on which we can determine whether an employee meets the conditions of the 30 percent ruling and request the Dutch Tax Authorities to grant the 30 percent ruling without them checking the content of the application.

Wage tax withholding agent

In the following situations, there is a Dutch withholding agent for wage tax purposes 

  • A Dutch company employs the employee  
  • The employee is employed by a foreign company, which has a (deemed) permanent establishment in the Netherlands  
  • The employee is employed by a foreign company, which does not have a permanent establishment in the Netherlands but has voluntarily registered as wage tax withholding agent and runs a Dutch (shadow) payroll administration.

As a deemed permanent establishment will be considered 

  • Activities performed by an employee on the Dutch section of the continental shelf for a consecutive period of at least 30 days (i.e. on a drilling platform or on board of a supply ship)  
  • The supply of personnel on the Dutch labor market.

The second bullet refers to the supply of employees, who will perform employment activities in the Netherlands, by a foreign (non-Dutch) company to a third party. This provision can also be applicable in case of provision of personnel by an employment agency and in concern relations (e.g. assignment to Dutch group entity).

In order to make the optimal use of the 30 percent ruling, it is necessary that all the employee’s remuneration (including stock options/equity-based remuneration granted from abroad) are included in the monthly Dutch payroll administration.

When an employment in the Netherlands ends, the 30 percent ruling can only be applied up to and including the month following the month in which the employment has ended, provided that the maximum duration has not been lapsed yet. The 30 percent ruling cannot be applied to payments made after this month.

If a Dutch withholding obligation exists, a Dutch part of the group can take over this obligation from the foreign entity when approved by the Dutch Tax Authorities.

Application

The application for the 30 percent ruling must be filed within 4 months after commencement of employment activities in the Netherlands. Employer and employee should sign an addendum to the employment contract in which they agree on application of the 30 percent ruling. This contract must be stated explicitly based upon legal requirements.

The resident employee to whom the 30 percent ruling is granted can elect to be treated as a partial non-resident taxpayer for wage tax and individual income tax purposes. A partial non-resident taxpayer is subject to tax in Box 1 and to tax on specific sources of income (such as a second home in the Netherlands). The deductions in Box 1 may be claimed (such as mortgage interest paid in respect of Dutch principal residence and alimony payments).

This election to be treated as a partial non-resident of the Netherlands can be made in each calendar year in which the 30 percent ruling is applicable. Based upon a special agreement, US citizens and US green card holders who have opted to be treated as a partial non- resident will be treated as a US resident for tax treaty purposes.

Non-residents can also apply for the 30 percent ruling. Supervisory Board Members may apply for the 30 percent ruling as well if they have a Dutch wage tax withholding agent. Since supervisory board members (commissioners) do not have a deemed employment anymore as from 1 January 2017, the so-called opting-in rules need to be applied to have a Dutch wage tax withholding agent.

As said, the 30 percent allowance should cover the employee’s extraterritorial costs the employee has to make because of their employment in the Netherlands. This means that such costs cannot be reimbursed tax free in addition to the 30 percent allowance.

There is no specific definition in the legislation of what constitutes extraterritorial costs. However, a resolution indicates the tax authorities’ position on extraterritorial costs, which could be a tax challenge. Employers should seek advice with respect to the reimbursement of extraterritorial expenses in addition to the 30 percent ruling. A lot of reimbursed costs to international mobile employees, which may appear to be business costs that can be reimbursed tax-free, are considered extraterritorial costs; consequently, reimbursing these costs is taxable if the employee has been granted the 30 percent ruling.

Salary earned from working abroad

Is salary earned from working abroad taxed in the Netherlands? If so, how?

Non-residents (with or without the expatriate concession), who are not directors or supervisory board members of a Dutch company, are not subject to Dutch income tax on compensation attributable to services performed outside the Netherlands. Employment- source income is calculated based on the number of working days spent in the Netherlands for the taxable year (including sick days that would have been spent in the Netherlands) divided by the actual working days (including sick days) multiplied by the amount of total employment income.

In the situation that no tax treaty is applicable, employment compensation paid to an employee with a Dutch wage tax withholding agent, who performs their services outside the Netherlands and who is not liable to tax outside the Netherlands, will in principle be taxed in the Netherlands provided that the employee also performs some employment activities in the Netherlands.

Residents, including resident individuals with the expatriate concession (exception for US citizen and green card holders – see above), are subject to Dutch income tax on their worldwide compensation. Based on a tax treaty with the state where the services are performed or national tax law, relief from double taxation may be available in the Netherlands.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in the Netherlands? If so, how?

Residents are subject to personal income tax in respect of their worldwide net income including income from substantial interests in Box 2 and investments in Box 3.

Box 3 deals with capital income, that is, income from savings and investments. Taxable income is determined on the basis of a deemed return on capital. This deemed return is a percentage of the total value of assets and liabilities on 1 January of the tax year. The deemed percentage is applied after deduction of an exempt amount (EUR 50,000 per taxpayer). It is emphasized that the taxable income is computed without regard to the actual income received. Thus, if actual income exceeds the deemed percentage, no tax is due on the excess. Conversely, there is no reduction in tax if actual income is less than the deemed percentage. The deemed income is taxed at 31 percent.

For these purposes, assets include not only money, shares, bonds, and tangible assets (such as a second house) but also any intangible assets, which have an economic value. The latter could include, for example, permits, licenses, and patents. Non-qualifying annuities are taxed in Box 3. Depending on the circumstances, rights arising under trusts may be covered by Box 3.

The way in which income is computed under Box 3 means that interest which is paid (for example, in order to finance leased real estate or expenses incurred for the maintenance of such real estate) is no longer relevant for tax purposes.

Box 2 deals with a substantial interest in companies. A substantial interest means (options to) 5 percent or more of the shares or a profit right of 5 percent or more of the profit. Dividends and capital gains are taxed at a flat rate of 26,90 percent.

Non-residents are subject to Dutch income tax on income derived from certain specified domestic sources including income sources such as income from real estate located in the Netherlands.

Dividends, interest, and rental income

Dividends, interest and rental income are not taxable in Box 3. In Box 2, dividends are taxed.

Gains from stock option exercises

The spread (difference of the option price and the fair market value of the underlying shares at the moment of exercise) of stock options that have been granted as employment remuneration will be taxed at the moment of exercise of the stock options.

Foreign exchange gains and losses

Not taxable/deductible.

Principal residence gains and losses

Not taxable/deductible.

Capital losses

Not deductible in Box 3. A loss from selling a substantial interest is deductible in Box 2.

Personal use items

Not taxable/deductible.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in the Netherlands? If so, please discuss?

Yes, only applicable to capital gains from substantial interest.

Are there capital gains tax exceptions in the Netherlands? If so, please discuss?

Pre-CGT Assets No.

Deemed disposal and acquisition

Yes, only applicable to capital gains from substantial interest.

General deductions from income

What are the general deductions from income allowed in the Netherlands?

Box 1 covers business income, employment income, income from other activities, income in the form of periodic payments (such as qualifying annuities and alimony), as well as income from the main private residence.

Income (positive and negative) from the principal residence:

Income from the principal residence is taken into account in Box 1. The most significant item under this heading is qualifying mortgage interest on the principal residence. This is treated as negative income and leads to a deduction in Box 1. As of 1 January 2013, new mortgage loans need to be paid off on an annuity or linear basis. Transitional rules are applicable. The amount of the deduction is limited in time to a maximum period of 30 years. In addition, mortgage interest can only be deducted from a loan relating to a subsequent residence insofar as the loan does not exceed the purchase price of the subsequent residence minus the difference between the sale price and the mortgage on the former residence. For example, new principal residence EUR400,000, old principal residence had a mortgage on it for EUR75,000 and was sold for EUR200,000; interest payments related to the new principal residence can only be deducted for a maximum mortgage of EUR400,000 – (200,000 – 75,000) = EUR275,000.

Income from the principle residence is also deemed to arise, the amount being set as a percentage of the tax value established periodically by the municipal authorities. For tax values of more than EUR 1,110,000, the income is set at EUR5,550 plus 2.35 percent on the amount exceeding EUR 1,110,000. For tax values between EUR75,000 and EUR1,110,000 the income is set at 0.50 percent of the value. Income from other properties (not being the principal residence such as vacation homes) is taken into account in Box 3.

Exceptionally, the income from more than one private residence may temporarily (with a maximum of 4 calendar years) be attributed to Box 1, such as where alterations are carried out on a private residence before moving into it or where a new private residence has already been purchased, but the old residence has not yet been sold and one of the two properties is empty.

Other deductions

Deductions are also allowed for expenses such as qualifying retirement annuity premiums and personal expenses like alimony. The rules regarding the deductibility of retirement annuity premiums are complicated and depend on the calculated pension gap of the taxpayer

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in the Netherlands?

Current year gross-up.

Calculation of estimates/ prepayments/withholding

How are estimates/prepayments/withholding of tax handled in the Netherlands? For example, pay-as-you-earn (PAYE), pay-as-you-go (PAYG), and so on.

Pay-as-you-earn (PAYE).

When are estimates/prepayments/withholding of tax due in the Netherlands? For example in monthly, annually, both, and so on.

In principle, on a monthly basis.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in the Netherlands? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Relief from double taxation for resident individual taxpayers may be provided by way of tax treaty or, depending on the circumstances, under domestic rules.

Income from foreign employment is generally covered by the exemption provisions under treaties or the unilateral decree. This is often referred to as exemption with progression, since the foreign income, although exempt, is taken into account in determining which brackets are applicable to the taxpayer’s remaining income. Arithmetically, this is achieved by including the foreign employment income in taxable income but then reducing the Dutch tax on this total income by that portion which is attributable to the foreign income. The formula for computing exemption relief is broadly as follows:

(Foreign income/worldwide income) x Dutch tax (not including National Insurance contributions) on worldwide income

Through this formula the exemption is provided against the average tax rate. The result of this computation is deducted from the Dutch tax on the worldwide income. The foreign tax on the foreign income in question may be more or may be less than the amount of this deduction from Dutch tax.

In cases where the worldwide income is smaller than the foreign income a carry forward of the excess may apply.

In some cases (such as for statutory directors), the credit method may apply. Income earned in the capacity of a statutory director is generally covered by the credit provisions under treaties or the unilateral decree. Under certain conditions the exemption method may apply.

General tax credits

What are the general tax credits that may be claimed in the Netherlands? Please list below.

Depending on an individual’s (family) position, the following tax credits may apply:

  • the general tax credit
  • the labor tax credit
  • the combination tax credit (for taxpayers with a child of the age younger than 12 and who do not have a partner or who earn less than their partner)
  • the tax credit for disabled young people
  • the old-age tax credit
  • the old-age tax credit for single persons
  • the tax credit for environmental investments.

Sample tax calculation

This calculation1 assumes a married taxpayer resident in the Netherlands with two children whose 3-year assignment begins 1 January 2020 and ends 31 December 2022. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

 

2020

USD

2021

USD

2022

USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000

Exchange rate used for calculation: USD1.00 = EUR0.9.

Other assumption 

  • All earned income is attributable to local sources  
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year 
  • Interest income is not remitted to the Netherlands
  • The company car is used for business and private purposes and originally cost USD50,000
  • The employee is deemed resident throughout the assignment
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income before applying the 30 percent ruling

Year-ended

2020

EUR

2021

EUR

20212

EUR

Days in the Netherlands during year

366

365

365

Earned income subject to income tax

 

 

 

Salary

90,000

90,000

90,000

Bonus

18000

18000

18000

Cost-of-living allowance

9,000

9,000

9,000

Housing allowance

10,800

10,800

10,800

Company car

9,900

9,900

9,900

Moving expense reimbursement

10,250

0

10,250

Home leave

0

4,500

0

Education allowance

0

0

0

Total earned income

147,950

142,200

147,950

Other income

0

0

0

Total income

147,950

142,200

147,950

Deductions

0

0

0

Total taxable income

147,950

142,200

147,950

Calculation of tax liability

 

2020

EUR

2021

EUR

2022

EUR

Taxable income as above

147,950

142,200

147,950

Dutch tax thereon (incl. national insurance contributions)

42,938

40,776

42,767

Less:

 

 

 

Domestic tax rebates

0

372

130

Foreign tax credits

0

0

0

Total Dutch tax

42,938

40,404

42,637

Notes

  • The 30 percent ruling is applicable. The taxable income as shown above is before applying the 30 percent ruling.
  • All amounts are gross amounts
  • The extraterritorial costs are taxable, however, taxed according to the 30 percent ruling.
  • The housing allowance is fully taxable (as paid in-cash and as a benefit-in-kind), however, taxed according to the 30 percent ruling.
  • The taxable private use of the company car is 22 percent of the list value of the company car; it is assumed that the list price is USD50,000.
  • A tax free amount of EUR7,750 is taken into account for the moving expenses reimbursement.
  • It is assumed that the education allowance is for an international school (which can be reimbursed tax-free).
  • Employee is liable to social security. Therefore, the income tax rates include the national insurance element.
  • Interest income is not taxable.
  • The calculations for 2021 and 2022 are based on the tax rates of 2021.

Footnote

1 Sample calculation generated by Meijburg & Co Tax Lawyers, the Netherlands member firm of affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Dutch Personal Income Tax Act 2001 and the Dutch Wage Tax Act 1964. These laws can be found at www.wetten.overheid.nl

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Special considerations for short-term assignments

Residency rules

Payroll considerations

Taxable income

Additional considerations

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year.

Residency rules

Are there special residency considerations for short-term assignments?

The short-term assignee will probably be considered a non-resident of the Netherlands during the short-term assignment to the Netherlands. This will ultimately depend on the concrete facts and circumstances surrounding the individual’s position.

Payroll considerations

Are there special payroll considerations for short-term assignments?

Based on the economic employer approach that the Dutch Supreme Court has adopted the short-term assignee could be subject to Dutch income tax as of day one (under certain conditions). The foreign employer will have a withholding obligation for Dutch wage tax purposes (under certain conditions, a Dutch group company can act as the withholding agent); the Dutch company can be held liable in case of under-withholding.

Taxable income

What income will be taxed during short-term assignments?

As a non-resident, the short-term assignee will be subject to Dutch income tax on Dutch- sourced income such as compensation attributable to services performed in the Netherlands.

Additional considerations

Are there any additional considerations that should be considered before initiating a short- term assignment in the Netherlands?

Yes, social security considerations as well as visa and work permit considerations. Considerations should also be given to pension issues as well as labor law issues including the Posted Workers Directive and a possible notification obligation that may be applicable in this regard.

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Other taxes and levies

Social security tax

Are there social security/social insurance taxes in the Netherlands? If so, what are the rates for employers and employees?

Employer and employee

The Dutch social security system consists of the National Insurance, the Employee Insurance and the Medical Insurance.

Type of insurance

Paid by employer

Paid by employee

Total

Unemployment Insurance Act

2.7 or 7.7% (depending on the duration and type of the employment contract)

0.00%

2.7 or 7.7% (depending on the duration and type of the employment contract)

Disability Act

8.89%

0.00%

8.89%

General Old Age Pensions Act

0.00%

17.90%

17.90%

General Surviving Relatives Act

0.00%

0.10%

0.10%

Long-term Care act

0.00%

9.65%

9.65%

Health Insurance Act

7%

0.00%

7%

Total

18.59or 23.59%

27.65%

46,24 or 51.24%

 

The National Insurance is comprised of the following contributions:

  • General Old Age Pensions Act (AOW): 17.9 percent, maximum EUR6,288,09
  • General Surviving Relatives Act (ANW): 0.1 percent, maximum EUR35,13
  • Long-term Care Act (WLZ): 9.65 percent, maximum EUR3,389,95

The Employee Insurance is comprised of the following contributions:

  • Unemployment Insurance Act (WW)
  • Disability Act (WIA and Whk).

Depending on the employee’s profession and nature of the employment contract, different rates may apply when calculating Employee Insurance contributions. The above percentages are average percentages for the Employee insurances..

Employer

  • WW: 2.7 or 7.7 percent, depending on the nature of the contract. The lower rate is applicable to employees with a contract of indefinite duration (not being an on-call contract), the higher rate on employees with a flexible/temporary employment contract. The lower rate may be applicable in some other very specific situations as well. In two situations the higher rate is applicable retroactively; when the employment agreement ends ultimately two months after the start of the employment and when the hours worked are 30 percent more than based on the employment agreement.
  • WIA and Whk: with an average of 8.89 percent the maximum will be EUR 5.183,85
  • Health insurance Act: 7 percent maximum EUR 4.081,77.

Medical insurance

Per 1 January 2006, the Health Insurance Act is applicable. The insurance premium consists of a nominal contribution (on average EUR1,473 per year, to be paid by the employee) and a means-tested contribution. The means-tested employer contribution is 7 percent of the income for contribution purposes (capped at EUR58.311, that is, EUR4.081,77 per year) and is an employer’s contribution.

Calculation of social security liability for the employee in sample calculation above

 

EUR

National insurance (levied together with income tax, before deduction of tax rebates)

9,713

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in the Netherlands?

Gift and wealth taxes

Gifts made by a resident of the Netherlands are basically taxed at the same rates as net assets inherited from the estate of a resident, although the tax-free limits may differ depending on the recipient of the gift. In certain situations, gifts made by former residents of the Netherlands are also taxed. Resident persons who benefit from the 30 percent ruling are subject to the tax like any other taxpayer.

There is no wealth tax in the Netherlands. However, wealth is taxed in Box 3 of the Dutch income tax.

Inheritance tax

Inheritance tax is levied on the net assets inherited from a person who is a resident of the Netherlands (this includes persons who benefit from the 30 percent ruling) or who died as a Dutch citizen within 10 years of leaving the Netherlands. The inheritance tax imposes less of a burden on close family members compared with that imposed on distant relatives or unrelated persons.

Real estate tax

Are there real estate taxes in the Netherlands?

Real estate tax is assessed by the municipality on the occupier of real property and is based on the value of the property. The rates vary from town to town.

Sales/VAT tax

Are there sales and/or value-added taxes in the Netherlands?

Sales tax

There is a sales tax on the transfer of Dutch real estate (this real estate transfer tax is 8 percent for commercial real estate and 2 percent for residential property).

There is a one-time exemption on the transfer of residential Dutch real estate if the buyer of the residential property is between 18 years and 35 years old.  For real estate with a value over EUR 400,000 the exemption is not applicable in case the transfer is after 31 March 2021.

Value-added tax (VAT)

The normal VAT rate is 21 percent. For certain goods and services other rates apply (9 percent or 0 percent).

Other taxes

Are there additional taxes in the Netherlands that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Local taxes

There are several local taxes assessed by the municipality, for instance waste tax, sewage charges, and dog tax.

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country/jurisdiction’s fiscal or banking authorities?

No.

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Immigration

Immigration

Following is an overview of the concept of The Netherlands’ immigration system for skilled labor.

This summary provides basic information regarding business visits to, and work authorization for, The Netherlands.

With regard to entry and residence into The Netherlands we must differentiate between nationals of the

European Union, European Economic Area and Switzerland and all other (so-called) third-country nationals. This last group can be divided into ‘visa nationals and ‘non-visa nationals’.

Another distinction is made in the anticipated duration of stay. Any stay up to 90 days is considered a short-stay visit, if the stay exceeds 90 days it will be considered a long-term stay or residence.

Most foreign nationals who come to The Netherlands for employment for more than 3 months will need a ‘Single Permit’, this includes the right to residence and the authorization to work. Depending on the specific situation, there are different filing categories each with specific conditions and which vary in their processes and processing times. For most filing categories, the foreign national must coordinate with a Dutch employer as they need to sponsor the application. Very few exceptions exist.

EU citizens and EEA citizens can exercise the right to Freedom of movement, which means they have unrestricted access to the Dutch labor market. No visa, work- and or residence permit is required to enter the Netherlands and to take up residence here or to work here. Regardless the nationality of the workers intra-EU assignments are however in general subject to the Posted Workers Notification obligation.

As for ‘third-country nationals’ the Netherlands distinguishes further between non-visa nationals and visa nationals. For a short stay of up to 90 days, non-visa nationals can enter the Netherlands on the basis of their national passport without the need of an entry visa.

The Netherlands further grants nationals of certain countries/jurisdictions visa waiver privileges for a long stay residence in The Netherlands. Nationals from Australia, Canada, Japan, New Zealand, South Korea, the UK and the USA may apply for a combined work and residence permit in-country/jurisdiction. They don’t require the special ‘MVV- entry visa’ in order to take up residence in the Netherlands. Note: After Brexit the same visa waiver will apply to UK nationals.

A non-visa national may not start working until the appropriate Single permit has been issued in the form of an official ID document. The application for this permit can be filed by the employer while the applicant is still in the home country/jurisdiction and should then be ready shortly after arrival.

Other nationalities are visa nationals which means they must obtain a special ‘MVV entry visa’ before entering The Netherlands. This is endorsed by the Dutch post in the home country/jurisdiction, but only after the employer in The Netherlands has first filed the application with the Dutch immigration authorities. After the application is approved the Dutch post will be authorized to issue the visa. The MVV entry visa is valid for a maximum period of 90 days (multiple entries) but will be converted to a Single permit with a longer validity after arrival in The Netherlands.

International Business Travel/Short-Term Assignments

Describe (a) which nationalities may enter The Netherlands as non-visa national, (b) which activities they may perform and (c) the maximum length of stay.

Depending on the nationality, some third country nationals visiting the Netherlands for a short stay visit, may be allowed to enter The Netherlands on the basis of their passports for up to 90 days within a 180 days rolling period. This does not apply to visa nationals.

In some cases, a treaty or special agreement authorizes citizens of certain countries/jurisdictions to enter The Netherlands without obtaining a visa. There are many countries/jurisdictions that have established visa exemptions with The Netherlands

Overview of visa nationals and non-visa nationals for entry into the Netherlands:

list of countries who’s nationals need or do not need a Schengen visa

In The Netherlands, business visitors must strictly limit their activities to the following:

  • Attending strategic business meetings or discussions on the development or the management of the company or organization;
  • Attending internal training courses, limited to observation, familiarization with the company culture and receiving instructions in a clear classroom situation under supervision of a trainer;
  • Fitting machinery/equipment, installing software or giving training sessions to users, subject to the strict condition that the machinery/software were supplied by the foreign employer.

The work permit exemption does not apply to any activities performed in relation to the primary manufacturing process or the core activities of the company or organization. Any performed work that falls out of the scope of the exemption will trigger a work permit requirement, even if this forms only a small part of the total activities undertaken.

The work permit exemption is applied based on self-assessment principle, no application has to be filed and as a result no output (permit) is issued. The company will not receive any confirmation that the work permit exemption is applied in a correct manner.

For the maximum permitted duration of stay the following calculation will apply: A traveler is required to count back 179 days from the current day of stay in the Schengen area. The current day of stay counts as the 180th day. Within this time frame the cumulated days of stay in all Schengen member states must not exceed 90 days. Days of stay spent in the issuing Schengen member state (in this case: The Netherlands) on the basis of a national visa or national residence permit do not count for the 90 days limitation.

The short-stay calculator on the following website can be used for calculating the period of allowed stay under the Schengen rules:

Short-stay Visa Calculator | Migration and Home Affairs (europa.eu)

In addition to The Netherlands, the following countries/jurisdictions are considered as Schengen member states: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.

Describe (a) the regulatory framework for business traveler being visa nationals (especially the applicable visa type), (b) which activities they may perform under this visa type and the (c) maximum length of stay.

Visa nationals are required to obtain a Schengen (C) visa to be able to enter into The Netherlands for business visitor activities (as described above). The Schengen Visa is typically issued for multiple entries. Although circumstances may vary, a business visitor may receive authorization to visit The Netherlands for up to 90 days within a rolling 180-day period.

The Schengen Visa must be applied for at the Dutch post in the home country/jurisdiction.

Schengen Visas are generally not eligible for in-country/jurisdiction extension, however in exceptional cases an extension would be possible.

Outline the process for obtaining the visa type(s) named above and describe (a) the required documents (including any legalization or translation requirements), (b) process steps, (c) processing time and (d) location of application.

  1. Document gathering
  2. Secure Schengen Visa appointment at the Dutch post in the home country/jurisdiction
  3. Prepare Schengen Visa application package
  4. Submit Schengen Visa application with the Dutch post in the home country/jurisdiction
  5. Obtain Schengen Visa and travel to The Netherlands

General advice is to apply for a Schengen Visa at least 15 business days before the planned travel date to the Netherlands.

CHECKLIST Schengen visa application

Long-Term Assignments

What are the main work permit categories for long-term assignments to The Netherlands? In this context outline whether a local employment contract is required for the specific permit type.

The Netherlands has a few popular long term immigration programs in place; the Highly Skilled Migrant (HSM) program, the Intra Corporate Transfer (ICT) program and of course there is also the European Blue Card option (EU Blue Card).

A HSM permit or EU Blue card can be applied for based on a local employment contract or an intra EU assignment agreement. The ICT program has to be applied in case of intra-corporate assignments for employees that reside outside the EU at the moment of the application.

Provide a general process overview to obtain a work and residence permit for long- term assignments (including processing times and maximum validation of the permit).

The application for a HSM-, ICT permit or EU Blue card is filed by sponsoring employer in the Netherlands. In case of a HSM application procedure it is essential that the sponsoring employer is registered with the immigration authorities as an Authorized Sponsor. For the other two programs it is not a strict requirement, however only if the sponsoring entity in the Netherlands is an Authorized Sponsor the application will be processed in an expedited way (2 to 3 weeks opposed to 6 to 8 weeks).

Upon approval by the immigration authorities visa nationals should obtain their MVV entry visa via the Dutch post in their home country/jurisdiction before traveling to the Netherlands. Non-visa nationals can travel to the Netherlands based on their passport.

Shortly after arrival the Dutch immigration authorities will send out an invitation to collect the actual residence permit / ID card including work authorization.

The validity of Dutch work and residence permits is generally linked to the validity of the employment- or assignment contract (with a maximum of 5 years in case of an indefinite employment contract), with the option to extend.

Is there a minimum salary requirement to obtain a long term work and residence permit for assignments? Can allowances be taken into account for the salary?

 The following gross monthly salary criteria apply as of 1 January 2021 (indexed annually):

  • Highly Skilled Migrants 30 years and older: EUR 4,752 excluding vacation allowance
  • Highly Skilled Migrants younger than 30 years: EUR 3,484 excluding vacation allowance
  • European Blue Card: EUR 5,567 excluding vacation allowance

The Highly Skilled Migrant salary criteria also apply to applications under the Intra Corporate Transfer program

The salary criterion is assessed solely on the salary received in cash, i.e. the fixed contractual gross salary in cash, excluding the vacation allowance to be paid by the employer. Non-cash salary payments and uncertain salary components such as overtime, tips, and benefit payments are excluded. However, expense allowances may be included provided they are guaranteed and regularly paid each month.

A fixed allowance such as a 13th month payment or fixed year-end bonus can only be included in the gross salary if they are paid to the highly skilled migrant in monthly arrears.

The salary must also be paid at least monthly into a bank account held by the employee. The pay slips must be made available for inspection upon first request.

Is there a fast-track process which could expedite the visa/ work permit?

The HSM-, ICT- and EU Blue card programs are, provided that the sponsoring entity is an Authorized Sponsor, the most expedited immigration processes available.

At what stage is the employee permitted to start working when applying for a long term work and residence permit (assignees/ local hire)?

Visa nationals are allowed to start their work activities upon arrival in the Netherlands based on an MVV entry visa.

Non-visa nationals can travel to the Netherlands based on their passport and are allowed to commence work upon collection of the residence permit card, or temporary equivalent, from the local Dutch immigration office.

Can a short term permit/ business visa be transferred to a long term permit in The Netherlands?

Non-visa nationals can apply for a long term residence permit within their first 90 days in the Netherlands.

Visa nationals will have to apply for a long term residence permit from outside the Netherlands and, upon approval, obtain their MVV entry visa in the home country/jurisdiction before re-entering the Netherlands for long term stay.

Is it possible to renew work and residence permits?

The end date of Dutch work and residence permits is generally linked to the end date of the employment- or assignment contract (with a maximum of 3 years in case of an ICT permit and 5 years in case of a HSM permit or EU Blue card). If the contract is continued/extended and the conditions for the permit are still being met an extension can be applied for at the Dutch immigration authorities. This process can typically be awaited in the Netherlands.

Is there a quota or system or a labor market test in place?

There are no quota for the issuing of Dutch work and residence permits. A labor market test applies to most local employment applications outside the scope of the HSM- or EU Blue card program.

General Immigration Related Questions

Would it be possible to bring family members to The Netherlands?

The HSM, ICT and EU Blue card programs allow for dependent family member permits. With family member the Dutch immigration authorities mean married, registered and unmarried spouses and children under 18. With a dependent permit the family member will also receive free access to the Dutch labor market.

Is it possible to obtain a permanent residence permit?

After 5 years of uninterrupted rightful stay in The Netherlands based on a Dutch residence permit a permanent residence permit can in most cases be applied for. An important condition for the permanent residence permit is that in the application phase the applicant can evidence to have passed the civic integration exams.

What if circumstances change after the Work and Residence application process (e.g. change of employment or personal situation, including job title, job role or salary)?

Relevant changes in the personal and professional situation should be notified to the Dutch immigration authorities within 4 weeks after they take place. Changes that can impact the immigration status are for instance: termination of the employment- or assignment contract, decrease in working hours or salary (resulting in a salary amount under the salary criterion level) and change of employers.

How long can a permit holder leave The Netherlands without their permit becoming invalid?

It is allowed to spend time outside The Netherlands during the validity of a Dutch permit. The permit holder can be outside The Netherlands for a maximum of 4 consecutive months in a year, for 3 years in a row. Or for a maximum of 6 consecutive months once during the validity of the permit.

Only Highly skilled migrants can leave The Netherlands, for the specific purpose of a foreign work assignment, for a maximum period of 8 consecutive months once during the validity of their permit.

It is important that during any stay outside The Netherlands the conditions for the Dutch permit are continuously met.

Must immigration permissions be cancelled by the end of the assignment/employment?

The end of an assignment or employment will have to be notified to the Dutch immigration authorities by the sponsoring employer within 4 weeks.

Are there any penalties for individuals and/or companies in place for non-compliance with immigration law?

The Dutch authorities check if companies are compliant with the immigration rules. Non-compliance can lead to a warning (in best case scenario), administrative and governmental fines for the sponsoring employer varying from EUR 225 to EUR 8,000 per violation and to revoking of permits.

In case of serious or repeated violations the Dutch authorities can also suspend or even withdraw the Authorized Sponsor status of a company. This would mean that the company can no longer make use of the Highly Skilled Migrant program at all and no longer make use of other expedited processes which require Authorized Sponsorship.

Other Important Items

List any other important items to note, or common obstacles faced, in The Netherlands when it comes to the immigration processes.

Regardless of the nationality of the worker, intra-EU assignments, short term and long term, are generally subject to the notification obligation under the Posted Workers Directive.

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Disclaimer

All information contained in this publication is summarized by Meijburg & Co Tax Lawyers, the Netherlands member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Dutch Personal Income Tax Act 2001 and the Dutch Wage Tax Act 1964. These laws can be found at https://wetten.overheid.nl.

Copyright

© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.