Housing provided by employer

Housing provided by employer implies that old times have returned on us. In the past the blue colour worker could not afford housing themselves, now it is the white colour worker.

Housing provided by employer

Everything an employee receives from the employer is taxed income. There are some exceptions to this rule. Paying for the costs of housing is not one of them.

In 1989 an employee purchased his own home. The employer reimbursed the employee with EUR 100 per month for reimbursement of extra mortgage interest costs. The necessity of this employee moving closer to his work, did not make the EUR 100 reimbursement tax free according to the court.

Maximum rental fee

The moment that the employer makes housing available for the employee, the maximum rent is limited. The maximum rent cannot exceed 18% of the annual income of that employee.

Example

You attract from abroad a EUR 60.000 gross annual salary costing employee. For that employee the company purchases an EUR 400.000 house at 4% mortgage interest loan. We assume the full amount of the purchase could be loaned and that there are no purchase costs. This is for the ease of the example.

The company pays EUR 400.000 times 4% is EUR 16.000 interest per year. We assume EUR 4.000 more additional costs are involved with the housing. Costs like city tax, small maintenance.

The annual costs is EUR 20.000. The maximum rent that can be charged based on the salary is EUR 10.800. This implies it costs the company EUR 9.200 to gain an employee. Is that a problem? With the current housing market (2022) where the house value increase roughly 15% per year, we think it is a good investment. Even if the housing market is neutral, with the current lack of employees, it is still a good investment.

30% ruling and housing

The 30% ruling is the best tax benefit we have in the Netherlands. That is not the same as the employer being able to pay 30% of the salary tax free and provide free housing. In other words, regardless if you have the 30% ruling, for the housing rent is to be paid.

Employer benefit

The benefit for the employer to arrange for the employee housing, either rent or purchase, is multiple. In the current housing market, both rent and purchase, it is very difficult to find suitable housing. Or only less suitable housing is found.

The employer that offers a job with suitable housing is king. King in the sense that this is an attractive offer for employees. Also King with respect to continuity of the employment, if the housing is connected to the employee being employed.

Tax is exciting

We think tax is exciting. This exciting possibility of the employer providing housing with the maximum 18% years’ salary rent, is not being used. We process for a significant number of employers the payroll and only one employer recently inquired about this option. We think this is a great opportunity for the employee. And possibly a good investment for the employer. Whether that is a good investment in the employee or housing market, future will tell.

How does payroll work in the Netherlands?

Payroll in the Netherlands and labor law

How does payroll work in the Netherlands you might wonder. You are aware we have a solid social system, how does that affect the execution of the payroll?

How does payroll work in the Netherlands?

An employer starting to employ employees in the Netherlands first needs to obtain a Dutch wage tax number. Such a number is never issued automatically, always needs to be applied for with the Dutch tax office.

During this application procedure the Dutch tax office also inquires about the activities of the company. If there are multiple, then the main activity is of interest. Based on the activities a sector code is issued with the Dutch wage tax number. The sector code determines the social premium percentages.

Running the payroll

The payroll provider will ask the employer for the employment contracts. The employment contract is the basis of the Dutch payroll. In the Netherlands it is indeed possible to have verbal employment agreements, however, we think that is not a good base for business. I think the labor lawyer will like you less for that. Only the managing director shareholder is obliged to have a written employment agreement.

In the Netherlands the gross salary is the basis. On top of the gross salary is paid out in May or June the 8% obligatory holiday pay. That is different from the holidays an employee can enjoy.

The gross salary will result in a net salary and that needs to be paid not later than the last day of the month. Normal in the Netherlands is to pay on the 25th of the month. Even with Christmas banks will process this.

Are employers’ costs a fixed percentage?

This is a frequently asked question. No, they are not. Some social premiums are maxed at EUR 59.706 (2022) gross salary. When the salary exceeds this amount, over the excess no more social premiums are calculated.

The tax credits, general and labor, decrease the moment the gross salary increases. Pension contributions have a maximum amount per year over which they are calculated. This maximum amount is different from the social premium amount.

The wage tax rate is 37,07 from zero to EUR 69.398 (2022). From that amount the 49,5% wage tax amount applies.

Payroll in the Netherlands and labor law
Payroll in the Netherlands and labor law

Exercising stock options

Exercising stock options, very popular now, involves the experts. The employer first has to determine during which period in which country the value of the stock options was build up. Then per country the exercising will be taxed.

Employers are once in a while audited by the Dutch tax office. To avoid that not enough wage tax was withheld over the stock option exercising, the employer simply take the maximum percentage, 49,5%. Then in an audit they are not accused of not having withheld enough, with the question to pay up the difference. The employee can claim back too much withheld wage tax in the income tax return.

That said, the moment the employee leaves the Netherlands and exercises its right while being abroad. Dutch tax is to be paid over the exercising of the option.

Mind you, under the 30% ruling only 70% of the value is taxed. The moment the 30% ruling employee leaves the Netherlands, there is no more 30% ruling. Timing could make a difference.

Our payroll team

Running a payroll is not rocket science but neither a walk in the park. The system of the Dutch tax office makes the digital reporting already an obstacle for foreign employers. A crash course running a payroll could take many months, making it no crash course at all.

You need a team that is eager to assist you and we happen to have such a team! Our team ran by Laura is focused on the non-Dutch employer that needs assistance with running a Dutch payroll. A Dutch payroll is not like a Dutch treat, as the employer is paying for the employees tax. That implies the employer has questions. Either questions the employer has itself or questions the employees ask the employer.

Our team base language is English. Most questions you still need to think of, are standard for our team. Please connect to the payroll team with your payroll need.

Tax is exciting

We think tax is exciting. Exciting is hiring employees. That implies your business is growing and you need support. We very much appreciate it if we can assist you with this service need.

Resident payroll versus non-resident payroll

Resident payroll versus non-resident payroll

Resident payroll versus non-resident payroll, is this actually a choice? We think it is, in an international situation.

Resident payroll versus non-resident payroll

In an international situation we have the opinion that there is a choice between a resident payroll or a non-resident payroll. That said there are limits to this choice.

Often we are informed that an foreign employer is reluctant to set up a payroll in the Netherlands as that results in all kind of other obligations. In a resident payroll situation that can indeed be the situation.

Resident payroll versus non-resident payroll

What is a resident payroll?

A resident payroll is that of an employer who has an address in the Netherlands also referred to as permanent establishment. Such an address requires the company to register itself with the Dutch Chamber of Commerce. Assuming no Dutch legal entity was set up, this is regarded a branch office. This branch office has identical obligations to a Dutch legal entity.

The above is also triggered when the employee rents in the name of the employer a desk at a place like wework, spaces or similar work place providers.

The result is indeed the foreign employer not only needs to file wage tax returns for the employment. Also Value Added Tax returns and a corporate income tax return is required.

Moreover, to comply with international accounting rules, the Dutch branch only employing a staff, needs to invoice the head office. An invoice for the costs of the payroll plus a margin on top. This is in line with the at arms’ length principle.

What is a non-resident payroll?

A non-resident payroll is that of an employer that has no address in the Netherlands. No permanent establishment. Hence no Chamber of Commerce registration, no Value Added Tax obligations, no corporate income tax obligations. Only the obligation to pay the correct amount of Dutch wage tax to the Dutch tax office.

A person being the permanent establishment

In the event the foreign employer has no address in the Netherlands, it can still require an obligatory resident payroll administration. That is the situation when the director of the company turns out to be the employee in the Netherlands.

A director who is authorized to represent the company is in person the permanent establishment. This requires the employer to register and file Dutch tax returns. If that is causing too much hassle, maybe it is an idea to resign as director?

Tax is exciting

We think tax is exciting. Assisting you with the best type of payroll for your organization is what gets our payroll team excited. Interested in our full service portfolio. Contact the team at payroll@orangetax.nl

Laura is the OrangeTax payroll manager

Social employee premiums and sector code, what is that?

Social employee premiums and sector code, you might have come across that if you employ a staff. What is a sector code?

Social employee premiumes and sector code

The moment a company informs the Dutch tax office that they employ an employee, the Dutch tax office issues a wage tax number. At the same time the Dutch tax office indicates in what type of sector code the company is in. In the event it is not clear by the tax office what are the company activities. The tax office will contact the employer to get more information.

The sector code

The employer runs a payroll for the employee. The employee is than in normal situations also socially insured in the Netherlands. You might agree that a desk job is less hazardous than working on a construction site.

The level of job hazard determines the percentage the employer need to contribute to the social premiums. The saver the job, the lower the percentage.

Indefinite period of time employment contract

The sector code set the base percentage applicable as social employee premiums. The type of employment contract also influences the premiums. As the Dutch Government is supporting employers to provide security to employees in the sense of an employment contract for an indefinite period of time. These contracts result in lower social premiums as well. Under condition the indefinite period is mentioned in a signed contract.

Increase of employee social premiums

The moment an employer terminates the employment of an ill employee, this has an impact. As the Dutch Government is keen on healthy working environments, an employment terminated while the employee was ill, will result in higher employee social premiums for the employer two years later.

In such a situation it is very important to have both an Arbo service at your side that can navigate the employer through the obligations. Plus a labour lawyer to avoid more employers costs than is justified. Both can help preventing an employment being terminated while the employee is ill.

Social employee premiums

The social employee premiums vary every year, hence the January payroll is always slightly later than normal months. These social employee premiums are not shown on the salary specification, it is part of the employer costs. Paid towards the Dutch tax office. The Dutch tax office is in this case also social premium collector.

A1 statement

In the event the employee is socially insured in another country, the other country can provide an A1 or E101 statement. That is an EU form.

Regardless if the form is true or false, the employer can apply the provided A1 form. If it turns out to be false, the employer will not receive a penalty.

How can an A1 form be false? That can be caused in the application of the A1 statement. If an employee is an entrepreneur in his home country and based on that an A1 statement is issued. If that same person is employed in the Netherlands, the issued entrepreneur A1 statement cannot be applied for employment.

As we have experienced a lot of non-useable A1 statements are in circulation, we recommend the employers to connect to the SVB. SVB stands for Sociale Verzekeringsbank. Not to be mistaken with the Silicon Valley Bank. That is the social security Government organization. To verdict if the A1 statement is usable or not.

Tax is exciting

We think tax is exciting. So far we have not met one employer that is excited about paying social premiums for the employee. Still, the social system is one of the backbones of the Dutch system. Very important and you will notice the moment a benefit needs to be called in, like unemployment, disability, health care, it is very much appreciated.

Payroll in the Netherlands and labor law

Payroll in the Netherlands and labor law

Payroll in the Netherlands and labor law are going hand in hand. How does that work out, which law is applicable?

Payroll in the Netherlands and labor law

Payroll in the Netherlands can be part of your service needs, if you are an employer situated abroad. You do understand tax treaties dictate to tax income from employment in the country where the employment is done. The exception to this rule is the position of the director of the company. For that person most tax treaties have a separate article.

183-day-rule

The famous 183 day rule makes Dutch labor law is not applicable, if the 183 day rule is correctly executed. The latter is often the problem. Counting the days is the easy part. But this rule has three conditions to be met. And if all are met, indeed the income earned in the Netherlands for a period less than 183 days is not taxed in the Netherlands.

A result of that is, that the labor law of the home country rules, as the period worked in the Netherlands is disregarded as such.

Labor law and labor lawyers

We always recommend to connect to a labor lawyer, being the employer. Working with Boontje Labour lawyers, highly recommended.

We are tax advisors, so we know about tax. Labour law is a subject we come across, and within limits we can explain the rules. The moment it becomes specific or challenging, we are the first to refer you to a labor lawyer.

Working with Wouter Hes of Boontje Labour Lawyers learned me a lot over the years. The most recent fact is that you can employ an employee working for you in the Netherlands under your home country labor rules. The condition is that should the Dutch rules offer the employee an advantage over the home country rules, Dutch rules win.

Payroll in the Netherlands and labor law

Setting up Dutch payroll and labor law

You might have learned that the rules in the Netherlands are in favor of the employee. This should not stop you, the employer, from getting involved in a Dutch payroll. It does imply, as good behavior of a company, to learn more about the Dutch rules. To have someone at your side assist you with the Dutch rules and regulations.

Many companies in the Netherlands employee a staff, why would you not?

That said, most companies also take out an insurance. This insurance covers a period during which you are to continue the payment of salaries, while concerning employees are ill. That makes the risk smaller.

Most employers also take up a subscription with what we call Arbo related companies. Those companies can monitor for the employer how the well-being is of the employees in case of illness. And these companies can help the employer with complying of the formalities to the Dutch Government in case of illness.

Tax is exciting

We think tax is exciting. Runnig a payroll for you in the Netherlands gets us excited indeed. We will be pleased to introduce you to Boontje labour lawyers. Feel free to connect to our payroll team at payroll@orangetax.nl

Working remote in the Netherlands – running a payroll

Working remote in the Netherlands for a foreign employer is common. How this is to be set up from a Dutch wage tax point needs attention.

Working remote in the Netherlands

We get a lot of zoom requests to discuss working remote in the Netherlands and tax. These zoom meetings are free of charge, as we think they are awesomely exciting.

We update the person about the aspects of Dutch payroll and the wage tax rates. Seldom we see excitement in the face on the other end of the zoom with respect to our tax rates. Hence we wonder why the decision was made to move to the Netherlands. It turns out that having a Dutch partner is often the base of the decision to live in the Netherlands.

Running a payroll

The rule is that wage tax is to  be paid in the country where the work is actually been done. This implies Dutch tax rules apply to working remote in the Netherlands for a foreign company.

We are quick to update the candidate about the existence of the so called 30% ruling. This implies 30% of the gross salary is not taxed. That makes an enormous difference.

The foreign employer is not keen on running a Dutch payroll. It is assumed that a Dutch entity is required and everything that comes with running an entity. We have a solution for this:

The non-resident employment payroll

This payroll is for an employer that has no presence in the Netherlands. No presence implies no office or desk rented for the Dutch employee, the Dutch employee does also not have a director title of the foreign company. In that case there is no Dutch permanent establishment.

Without such an establishment we are able to set up the non-resident employment payroll. This payroll is identical to a similar domestic situation. The difference for the foreign employer is that there are no other obligations, than the obligations related to the employment.

OrangeTax payroll team

The OrangeTax payroll team is a very experienced team setting up non-residents and resident payroll administrations. The experience shows in predictions whether a 30% ruling would be granted or not. Or experience in Collective Labour Agreements being applicable or not. And if applicable, how to comply with them. Making international payments less complex as well. The team is also very active in responding to questions and committed to a minimal number of work days for the turnaround.

Tax is Exciting

We think tax is exciting. If you are now exciting about setting up a payroll with us, please connect to payroll@orangetax.nl and we are eager to assist you. Our fees you find already on our website www.orangetax.com

Laura – OrangeTax payroll manager

Minimum salary of a BV shareholder director

A company is a source of income

The minimum salary of a BV shareholder director is a topic that needs to be address constantly. Either by the director or the Dutch tax office.

Minimum salary of a BV shareholder director

The Dutch BV company or any foreign legal entity that operates in the Netherlands, has a minimum salary obligation for the shareholder director.

The thought behind this minimum salary is to prevent the director using financial facilities in the Netherlands intended for the poor. In the past a shareholder could waive his salary, as paying dividend is tax wise cheaper. The result is that the shareholder had no salary. If you have no income, you are poor. For the poor we have healthcare credit, rental credit , daycare credit. But this shareholder is far from poor, a huge dividend was paid out. Hence to avoid the social system being misused, a minimum salary was made obligatory.

The rules with respect to the salary

The salary is set at EUR 48.000 (2022) full time work. If the director is not working at all for the BV, the minimum salary is EUR 5.000 per year.

However, the salary cannot be less than 75% of the profit. If the profit is EUR 60.000, 75% amounts to EUR 45.000. Then the other minimum overrules the 75%, being the EUR 48.000 salary.

If the profit is EUR 140.000, the salary needs to be EUR 105.000. If the profit is EUR 1 mln the salary is EUR 750.000. Which is a bit much, unless it is actually spend.

What to do to avoid the EUR 750.000 salary as mentioned above?

In order to avoid needing to pay EUR 750.000 you are going to look for a person that does more or less the same job as you do. The difference is, this person has no shares in the company. Then you ask this persons salary and you use that for your own company.

Two problems with this philosophy. The first problem is that a director shareholder often has either a unique position or in his or her trade a position that is always taken by the shareholder director. In other words, finding a comparable person is not really possible.

The second problem is that in the Netherlands you do not display to anybody your salary. You do your best to have the neighbors think you earn much more than they do. Talking about actual numbers is not done.

Who knows about all the salary amounts earned in the Netherlands?

Indeed, the Dutch tax office. The Dutch tax office counters your salary in a court case. That does not sound like a fair fight.

To make the fight more fair, the courts rule that when you state you should earn less than EUR 48.000, the director shareholder needs to proof that. If the director share holder takes out a salary exceeding the EUR 48.000 but not reaching the 75% of the profit. Then the Dutch tax office needs to substantiate that another person in the same position not being a shareholder earns more.

Current account shareholder

A side aspect of the minimum salary is the current account of the shareholder. The shareholder cannot set his salary at the bare minimum of EUR 48.000 and at the same time takes money from the business bank account via a loan. That is the current account with the shareholder. If that is the case, the Dutch tax office will address that during an audit. Possibility is there that this could be regarded as net salary payments.

Minimum salary of a BV shareholder director
Minimum salary of a BV shareholder director

Minimum salary court case

A holding company earned EUR 80.000 management fee. The director shareholder did not take any salary. The Dutch tax office made in his income tax return an adjustment. EUR 44.000 (2014 minimum salary, the year under discussion) was added to his Box 1 employment income.

The director shareholder appealed this adjustment in court and stated that the salary should be substantially lower. The tax office argued that a person in his position (logistic manager) should earn much more than the EUR 44.000. The court agreed with the Dutch tax office. The tax office won as the director was not able to present proof of other persons in more or less the same position earning less.

Tax is exciting

We think tax is exciting. The salary discussion we do not always understand. The one moment the director shareholder asks us to keep the salary at the bare minimum. The next moment, often after a call of the wife, the salary needs to be sky high. Why sky high? The higher the income, the more mortgage loan can be obtained to purchase a bigger house.

In other words, the salary impacts more than only the tax rates. It helps you pay your bills, it offers you opportunities to indeed purchase a house. We prefer to set your salary based on your needs. The higher the salary is above the EUR 48.000, or the more close to the 75% moment, the less hassle is to be expected with the tax office about this topic. Tax is exciting, hassle with the tax office is not.

Shareholder and salary income

share holder salary

Shareholder and salary income is a continuous discussion. There are rules in the Netherlands. The preferred situation is low salary high dividend, but that is forbidden. The regular employees also play part in this discussion, how is that possible?

Shareholder and salary income

If you are the shareholder of the company in which you are the director, you can do as you like. You think. Tax wise that is not the case. Many before you have indeed done as they liked. This resulted in rules that have been set in place.

Low income high dividend

The most desired salary is a low salary and then high dividend. Is that indeed a desire?

Example

Let us assume the salary is EUR 70.000, so anything earned on top is taxed at 49,5% income tax. To avoid that, no EUR 50.000 bonus is paid to this director. As a result the company made for the purpose of this example EUR 50.000 profit. That profit is taxed with 16% corporate income tax being EUR 8.000. Hence there is EUR 42.000 after tax profit available for dividend. The dividend withholding tax is 26,5%. That implies EUR 11.130 dividend tax is to be paid, so net received by the director is EUR 30.870. That is more than EUR 50.000 gross salary taxed at 49,5% income tax.

Shareholder and salary income

What is the problem?

The problem is that most directors did not take EUR 70.000 as salary, but they waived their salary. Zero. If you have zero salary, you are poor. If you are poor, you receive a rental tax credit, health carde tax credit  and day care tax credit. But this employee is not poor, he will probably receive EUR 70.000 dividend.

To avoid the zero salary the minimum salary for a director that also owns at least 5% in shares in the company is set at EUR 47.000. However, the salary cannot be less than 75% of a similar position. And the salary cannot be less than the highest paid employee who has no shares in the company.

Court case shareholder and salary income

A director paid himself the following salaries: EUR 177.705 (2013), EUR 180.962 (2014), EUR 199.098 (2015), EUR 217.427 (2016), EUR 217.427 (2017) and EUR 215.239 (2018). The tax office disagreed with that salary, as the highest paid employee earned constantly EUR 215.239 during these years.

The director argued in court that a similar person earned the salary that was paid to him over the years. The proof he provided was that of a person not in a similar position. Nor was sufficient proof provided, only for the year 2016.

The court dismissed the proof, and agreed with the tax office that over the 2013-2018 period the correct salary is EUR 215.239 and all years were updated to that amount.

What is a correct salary?

We are often asked what is the best salary tax wise to obtain. This is not a simple question, as the director holding a 30% ruling benefits from taking the maximum salary possible. That is tax wise better. Some fix themselves on the minimum of EUR 47.000. That is a risk if the result of the company is very positive. The court ruled in 2011 that 75% of the profit is a correct salary for the shareholder, not less than EUR 47.000 (2021).

That was the tax part. Then the EUR 47.000 salaried director comes to us a couple of years later that he want to purchase a house, but the bank does not want to loan him enough. The bank states his salary is not good enough. Setting a salary is more than tax alone, more is involved.

Tax is exciting

We think tax is exciting. We are excited for you to start a BV company. The salary is a flexible part of the administration. At the start the company probably does not earn enough to pay salary. If successful much more salary can be paid. This update needs to be made. If not, the tax office could compare the corporate result against director salary earned in their system. If not in line with expectations, corrections probably follow. Corrections are often not exciting.

Vacation allowance

Vacation allowance or holiday pay is a hot topic in the month of May in the Netherlands. Hot with the employees, as they are super enthusiastic. Hot with employers as they do not understand the sudden increase in employment costs.

Vacation allowance

Vacation allowance introduced in 1910 by our Government. Employees around that time earned enough income to pay for the rent, groceries and small joys of life like the cigarette. There was no budget for an actual holiday.

The holiday pay enables the blue color workers to enjoy a holiday.

How does vacation allowance work?

The holiday pay is 8% salary calculated over salary earned during the previous 12 months. Only regular earned salary applies. Bonusses are not part of the calculation. Whether you are a Dutch resident tax payer. Whether you are a non resident tax payer. The holiday pay applies to you being employed by a Dutch employer.

Working remotely for a foreign employer from your home in the Netherlands, makes you entitled to the vacation pay. The rule with remote working is that the place where you actual perform the job is the country that can tax the salary income. If you work from home for a foreign company, Dutch wage tax applies. The moment Dutch wage tax applies, Dutch labour law applies as well. Part of the Dutch labour law is the holiday allowance.

Vacation allowance
http://www.orangetax.com

How does the holiday pay work accounting wise?

The payroll ran for the employer takes every month already into account 8% of the salary of that month for the vacation pay out moment. It is a reservation that falls free in the month of May or June. That implies the moment holiday pay is being paid, the employer does not have in that specific month double payroll costs.

What makes holiday pay vacation allowance?

The employer can argue that in December a 13th month is paid, that equals the vacation allowance. This is not correct. Such argument is not valid. Holiday pay is identified by law as an 8% remuneration paid in May or June.

If it is decided to pay the holiday pay in another month than May or June, such an allowance can then not be regarded to be vacation allowance. This implies the employees are no paid holiday pay and can still claim to be paid the holiday pay.

Some internationals are unfamiliar with the concept of holiday pay and prefer to have 1/12 of the holiday pay paid out monthly. This aspect can be agree in the employment agreement.

Tax is exciting!

We think tax is exciting. Vacation allowance is exciting! Research learned that most employees do not actually use holiday pay for vacation, but to either pay outstanding debts or larger purchases like a TV, scooter or things like that.

KLM pilots evading Dutch income tax

Entrepreneur leaving the Netherlands

The headline is that the Dutch Government has no issue with KLM pilots evading Dutch income tax for KLM to qualify for the Covid 19 aid. Are these pilots tax evaders?

KLM pilots evading Dutch income tax

Pilots and crew on board of vessels and airplanes are specially addressed in the tax treaties the Dutch Government has with nations around the world. In some tax treaties it states that the pilot is taxed in the country where the airline company has its central point of command. In other tax treaties it states that the pilot is taxed in the country where the pilot is living.

You are a pilot and your airline company is good established around the world. And you have the opportunity to live on Malta, in Spain or where you like. You simply hop on a plain to work. You do your joband you return to a country where tax rates can be more pleasant. Is that evading tax or using the opportunities the Dutch Government offers.

KLM pilots evading Dutch income tax
KLM Pilots evading Dutch income tax

KLM pilots using opportunities offered by the Dutch Government

We do not think KLM pilots are evading Dutch income tax. We think KLM pilots have taken good notice of the Dutch tax treaties and executed them as stated in the agreement. Evading has a negative tone, but tax treaties have no negative tone.

If your employer offers you the possibility to live where you desire. This desire does not conflict with the work to be done. The outcome could be that employees chose for a fiscal more friendly country.

KLM pilots – social premiums

KLM pilots and Dutch income tax options, is arranged in the tax treaties we have. A tax treaty is not a social premium treaty. For social premiums the main rule remains in place. The KLM pilot is obligatory insured for social insurance in the country where the employer is situated. Hence Dutch social premiums is still paid. If KLM pilots have been for some reason dismissed. The the unemployment benefit is for them, they have always contributed to this system. No ‘evading’ in case of social premiums.

Tax is exciting – how can we assist this evading?

We are very enthusiastic about taxation. Helping you paying less tax within rules and regulations is something we are keen to do. KLM pilots need a procedure to follow. This procedure makes it possible to disconnect the tax part from the social premium part. We at Tax is Exciting BV is happy to assist. Do not hesitate to contact us.

What is taxable salary?

Sometimes we are contacted by potential clients or corrected by employees of existing clients that certain reimbursements should not be taxed. What is taxable salary?

What is taxable salary?

Basically a very simple answer: all you receive from your employer, unless it is exempted from taxation.

What is often asked for:

We like to pay our employee a fixed monthly amount tax free for costs he or she makes for the employment. That is not possible. If costs are made that could be reimbursed, like costs during travel, or food with a client, then these costs need to be specified and the exact amount is reimbursed.

what is taxable salary
what is taxable salary

The employee uses one of the residential houses we have at our disposal till the moment he or she can find his or her own place. The rental value of this place is a remuneration in kind subject to wage tax.

The employee assumes the employer can pay for the private health care insurance cost. That is not possible, if done, this is a net payment that needs to be crossed up.

Travel costs are maxed to 0,19c per KM distance. There is a minimum distance of 10km and maximum distance of 75 km, one way.

Sometimes the employee uses the private car for company use. To go to a course, visit a client or similar activities. Then the petrol is often paid for. If there is no company car used by this employee, no car costs can be reimbursed tax free. All travel costs are to be supposed in the 0,19c per KM.

Home office costs such as part of the rent, part of the utility costs, part of the interior (desk) or internet connection, is claimed for. All reimbursements are regarded net salary payments and need to be crossed up.

All is taxable salary?

That is the best way to approach the subject. Ofcourse there is the werkkostenregeling with a limited number of possibilities. However, that amount is quickly fully consumed by the Christmas gift, the employee dinner, or other aspect the employer thinks he or she can make the employee happy with.

Orange Tax Services – Tax is exciting!

We understand the need to get something tax free, but you should also understand the Dutch tax office that would like to keep it simple. Keeping it simple is stating all the employee gets is taxed. In the past it has been complex enough and the wish of the people and politic was and is to make it simple. This time that was a success.

Most frequently asked questions about Dutch payroll

My name is Laura Melzer-Boon and I am the payroll manager with Orange Tax Services. We provide Dutch payroll services to small and medium sized companies. My team and me are often asked the same questions, below I will address some of them.

Most frequently asked questions about Dutch payroll

What is holiday pay?

In the Netherlands we have besides the holidays an employee can take up, also holiday pay. Even though the name is almost similar, these two aspects of the salary administration is not the same. The holidays is obvious. The holiday pay is less obvious.

In the past Dutch employees had barely enough net salary to pay for the rent and groceries. The Dutch Government wanted to improve the living conditions and introduced an compulsory holiday pay benefit so the Dutch  can actually go on holiday.

This benefit amounts to 8% over the salary earned in the previous 12 months and is paid in either May or June. The general rule is that this benefit is paid in May over the salary of June (previous year) up to and including May (this year).

Is this holiday pay compulsory? Yes it is, as it is part of our labour law. Can you decide not to pay holiday pay? Yes you can, but then you need to put in the employment agreement explicitly that the salary is including holiday pay. Then every month you see the holiday pay shown as being paid out.

Can you pay the holiday pay in another month than May or June? No, you cannot. In another month it is not regarded holiday pay, so the employer might think he has complied, but the employee can still successfully demand in addition holiday pay to be paid in May or June.

The holiday pay can be spend on anything, like a LED TV, washmachine, but also on an actual holiday. Maybe this explains why you see throughout the world Dutch travelling.

Is my salary high enough for the 30% ruling?

The 30% ruling we explained in another article. Part of the requirements is the minimum salary. Our law maker was not so clever in his communication with respect to the minimum salary requirement, but then again, maybe due to legal aspects he had no choice.

Hence the minimum salary in the Dutch payroll after the ruling has already been applied is mentioned in the legislation. If you earn a fiscal (!) salary of at least EUR 37.743 (2019) or when you are younger than and you hold a master degree, then the minimum fiscal salary is EUR 28.690 (2019).

But please understand these amounts are after the 30% ruling has already been applied. That implies this is already 70% of your gross salary. Hence the actual gross salary minimum is EUR 53.918 and EUR 40.985.

Then if you qualified for the lower salary and you do turn 30, you need to immediately that month qualify for the higher amount. As that hardly ever happens, you need to fear turning 30.

If you work for a Dutch University, no minimum income requirement applies.

Is pension compulsory?

That depends in what sector the employer is in. The tax office allocates an employer based on the core or actual work done in the company, in a sector. Some sectors like employees working in a shop, cleaners, metalworkers have compulsory collective labour agreements and those agreements have an compulsory pension contribution.

If you are not in such a sector, then you are not obliged to have a pension for your employees. If you do have a pension installed for your employees, all employees need to take part in this pension benefit.

Should you take out a pension insurance? If you have no Chambers of Commerce registration, you simply cannot take one out, as the first question on the application form is your KVK number. And yes, you can run a payroll without presence in the Netherlands.

If you can take out a pension, you should think twice if that is indeed in favor of the employees. Our system has become a dinosaur system that knows no flexibility. That implies you cannot switch pension insurance companies and take with you the buildup capital. You cannot leave the Netherland and take with you the buildup capital. If you somehow insist, then the tax is 52% plus 20% penalty tax, plus 25% penalty is a 97% tax rate. A so called show stopper. Most expats stay between 5 to 10 years in the Netherlands and then they leave, but the pension stays behind forever.

I worked less than 183 days in the Netherlands, can I claim back my tax?

No you cannot. The 183 day rule is in the tax treaties the Netherlands has with most countries. A tax treaty is an agreement between countries if there is a dispute over which country can tax what.

With employment in the Netherlands, even if you have a foreign company like a Ltd company and you work in the Netherlands, it is regarded domestic employment, hence no dispute, it is taxed in the Netherlands. If there is no discussion which country can tax what, the tax treaty is not applicable and then the 183 cannot be used. But even if the 183 day rule is called for, the three conditions are nearly never met. So if you worked in the Netherlands, you have paid your dues, but cannot claim all of it back.

We do recommend you to check with us after the calendar year has finished and you moved away, if you can have a refund via the migration income tax return.

If you have a Dutch payroll question we have not addressed above, feel free to contact me.