Changes for individuals
The main changes for individuals that were implemented into the Dutch (tax) legislation in the last few years are:
- If certain conditions are met, a foreign employee working in the Netherlands may be granted the so-called 30% ruling. Under this ruling, 30% of the income from active employment can be paid tax free. As of 2019, the maximum period of the 30% ruling is reduced to five years.
- As of 1 January 2015, the tax beneficial build-up of pension entitlements is capped to a maximum salary, and for 2019 the maximum salary is 107,593 euros (EUR) per annum. As such, it is, in most situations, not possible to accrue tax-facilitated pension for salary in excess of EUR 107,593. It might therefore be advisable for employers, as well as their employees, to seek further guidance on the impact of these new limitations in case the salary of certain employees exceeds EUR 107,593. Making further arrangements might be recommended, to ensure that the pension scheme still suits the company's wishes and the legislative requirements.
- As of 1 January 2016, the maximum term of unemployment benefits is reduced in phases. From 2019, the maximum public unemployment benefit will be 24 months.
- Since 1 January 2017, the taxation on (fixed) income from savings and investments has changed. In the Netherlands, net assets (assets minus debts) of an individual valued on 1 January are deemed to generate a fixed return on investment. From 2017 onwards, the fixed return on box 3 assets will be calculated on the basis of three ascending fixed percentages (see the Income determination section for further details).
- The Anti-Sham Arrangements Act (Wet Aanpak Schijnconstructies or WAS), which became partially effective on 1 July 2015, entered into full effect on 1 January 2016. As of 1 January 2017, further requirements have been introduced. The WAS seeks to prevent unfair competition between businesses, strengthen the legal position of employees, and to combat the underpayment of workers.
- As of 1 January 2017, withholdings and deductions from the minimum wage are no longer permitted. To guarantee that every employee indeed receives the minimum wage, no amounts may be set off against or withheld or deducted from the statutory minimum wage. This does not apply to any wage advances paid as agreed with the employee. Besides, an exemption applies for housing costs and health insurances costs, which under conditions can still be set off against or deducted from the minimum wage as of 1 January 2017. It is permitted to withhold or deduct amounts from the wage paid in excess of the minimum wage.
Tax status independent contractors
On 1 May 2016, the Declaration of Independent Contractor Status (VAR) has been abolished. This has consequences for contractors who used to perform services in the Netherlands based on such a declaration, as well as for the entities who hire these contractors. The new legislation means that organisations that work with contractors have to assess the relationship with their contractors to make sure the labour relationship does not qualify as an employment.
New legislation to provide clarity for clients of contractors about the nature of the labour relationship is planned to enter into force as of 1 January 2021. In the meantime, a tax status independent contractors transitional period will apply, during which the Dutch tax authorities will only enforce legislation in organisations in case of evident and intentional false self-employment.
Supervisory board members
During the parliamentary process of the ‘Wet DBA’, the State Secretary of Finance announced the intention to abolish the deemed employment for supervisory board members/commissioners. The cancellation of the deemed employment has come into force as of 1 January 2017, through a change in the Wage Tax Law. The termination of the deemed employment for supervisory board members means that organisations are no longer obligated to withhold from and remit wage tax for the remuneration of their supervisory board members. The taxation on their remuneration will, as a starting point, take place (fully) through their personal income tax (PIT) return. The termination of a deemed employment situation may also have other effects, such as with respect to the application of benefits and regulations that require payment through a Dutch payroll administration, e.g. the 30% ruling and the work-related cost scheme. Although there may still be an alternative approach to this situation in which the payment of the board member’s remuneration still runs via the payroll administration, an action is required by the organisation and the board members in that case.