Remote working in the Netherlands and tax. A hot topic, as remote working is popular. Dutch tax rates are still not that popular, how does it work?
Remote working in the Netherlands and tax
Working remote has become popular due to the pandemic situation. Working from home has become an option. Then making the move to a home in a different country is quickly made. Is it as simple with respect to taxation and social premium? No of course not.
The main rule with employment tax is that the tax rates apply of the country in which the work is actually done. The moment your employer is in Spain, but you work from home in the Netherlands. Then Dutch tax and social premiums apply.
We are quickly countered with the 183 day rule. Suddenly everybody knows the 183 day rule. The 183 number of days are quickly calculated. Besides the number of days there are 2 more requirements. And the objective of this rule might not be possible.
Example You work for Spanish company and you and your family live in the Netherlands. You work from home, but you make sure you stay less than 183 days in the Netherlands. The thing is, the residence of your family makes you a Dutch tax resident. The 183 day rule is to prevent you from becoming a Dutch tax resident. If these two collide, the family residence wins. In other words, the 183 day rule does not apply.
The employee is socially insured in the country where the employer is situated. In the above example with the Spanish employer, you would think Spanish social premiums apply. However, if the income is correctly taxed, Dutch wage tax applies.
In order to get Dutch wage tax in place, the Spanish employer needs to register in the Netherlands. That is the moment the employee working in the Netherlands has a Dutch employer, being the freshly registered Spanish employer. Hence Dutch social premiums apply. Despite the rate of social premiums, you would like to be socially insured in the Netherlands, if you live in the Netherlands. Makes live much easier.
A split payroll implies you work remote in the Netherlands and you pay Dutch wage tax. For the days you physically work in Spain, you pay Spanish tax. Probably Spanish tax is lower than Dutch tax, which country isn’t. Hence you have the opinion you save tax.
Unfortunately that is not correct. Due to the fact that you are a Dutch tax resident you need to put in your Dutch tax return your worldwide income. Also the Spanish income. The Spanish income comes on top of your Dutch income. If you are in the highest tax bracket, the Spanish income is taxed at the highest tax rate.
The double taxation relief is a double taxation relief. Not a double social premium relief. For the double taxation relief you need to delete from the tax percentage the social premium part. Then over the average tax rates (then we have 3 tax brackets) you receive a double taxation relief.
If your Spanish income is taxed at the high tax rate of 49,5% and you receive a double taxation relief over the average rate of 10%, 38% and 49,5%. You do not need to have a math degree to see that the relief is much less than the actual taxation, hence a split payroll might not bring what you expect from it.
What is the solution? Nonresident employer payroll
The non-resident employer payroll implies the Spanish company from the example above, registers only for wage tax in the Netherlands. That is possible if the company has no office in the Netherlands. Nor does the employee rent an office reimbursed by the employer. If this employee does also not have a special position such as director, then a non-resident employer payroll is possible.
The company is not exposed for more than the tax related to the employment. The employee is taxed as if this employee was working with a Dutch company. Child care, health care, rental credit can all be applied, if qualified. A mortgage can be taken out on the Dutch salary.
Tax is exciting
We think tax is exciting. And because of that we offer the non-resident employer payroll service. We have offered this service already for more than 15 years successfully. Feel free to contact us for our quote. A quote you can also find on our website, as we try to be as transparent as we can.