Netherlands

Individual - Significant developments

Last reviewed - 01 July 2022

Changes for individuals

The main changes for individuals that were implemented into the Dutch (tax) legislation in the last few years are:

  • As part of the COVID-19 tax measures the so-called ‘NOW-measure’ was introduced in the Netherlands. This measure, which in Dutch is called ‘Tijdelijke noodmaatregel overbrugging ter behoud van werkgelegenheid’ (NOW), entails a compensation for labour costs for companies whose turnover has decreased by at least 20% due to the COVID-19 measures. The measure was applicable up to 1 April 2022. The actual amount of the compensation depends on the extent of the company's turnover decrease and on the company's wage and salary bill.
  • If an employer based in the European Union (EU) posts workers temporarily to the Netherlands, then those workers are entitled to the main terms and conditions of employment applicable in the Netherlands. This is regulated, in particular, in the Terms of Employment Posted Workers in the European Union Act (WagwEU). Employers based in the European Union who temporarily post employees in the Netherlands are required, amongst other things, to file a notification via the Posted Workers online portal of the Ministry of Social Affairs and Employment prior to the start of the work. This obligation applies from 1 March 2020.
  • As of 2021, 18- to 35-year-old first-time buyers on the housing market are eligible for a transfer tax exemption for houses under 400,000 euros (EUR). Buyers who don't plan to live in their home (investors) have to pay a transfer tax of 8%, and there are plans to increase it to 9%.
  • As of 1 January 2020, the Balance Employment Market Act (WAB) has entered into force, which introduces important legal changes for Dutch employers. Based on this Act, from 1 January 2020:
    • employers will pay a low unemployment benefit contribution for employees with a permanent employment contract and a higher contribution for employees with a flexible contract (the difference is 5 percentage points)
    • employers have to offer on-call employees who have been in their employ for 12 months or longer a fixed-hour contract
    • payroll employees are entitled to at least the same working conditions as employees of the company they are seconded to, and
    • a transition payment is mandatory whenever an employer terminates or fails to renew a temporary contract.
  • In addition to the above, as of 1 January 2022, the basic rate of the disability act (WIA) has also been split into a high and low contribution (the difference is less than 2 percentage points). The size of the employer is decisive for whether the high or low rate should be applied.
  • From 14 December 2019, with retroactive effect from 9 February 2017, a new ministerial decree entered into force as a consequence of case law from the European Court of Justice (ECJ). Based on this degree, non-resident taxpayers who live in a European Union (EU) country and earn their income almost entirely in two or more countries outside their home country, including the Netherlands, can claim pro rata personal deductions in the Netherlands.

  • At the moment, only people with no tax partner or with a partner with a higher income are eligible for the income-dependent combination discount (IACK). If a non-resident taxpayer works in the Netherlands but lives abroad, the partner abroad is not perceived to be a tax partner in the Netherlands. As a result, the non-resident taxpayer is unintentionally entitled to the IACK. As of 1 January 2022, this will change, and the tax partner abroad will be seen as the tax partner for the purposes of the IACK.

  • Due to the COVID-19 crisis, a foreign employee who does not live in the Netherlands might have been working from home for a longer period of time and might not have been in the Netherlands during the calendar year 2021. This might affect the applicability of the 30% ruling. In many cases, the 30% ruling continues automatically; however, in some cases, the foreign employee might need to apply for a new decision.
  • In May 2020, the State Secretary announced that the Dutch tax treatment of foreign remuneration of board members would be changed, but it is unclear when this will be imposed. For remuneration received as a board member of a foreign-based company (‘directeuren en commissarissen’), the exemption method for relief of double taxation will no longer be available and will result in a tax credit method for relief of double taxation.

Tax status independent contractors

On 1 May 2016, the Declaration of Independent Contractor Status (VAR) was abolished and replaced with the deregulation of labour relations assessment act (Wet DBA). Consequently, organisations that work with contractors must assess their engagement with their contractors to make sure that it does not qualify as an employment relationship. To support organisations with this assessment, the Dutch government launched a web module in order to (help) determine whether payroll taxes need to be withheld and paid.

The web module was launched as a pilot in January 2021. The results of the pilot were published in September 2021 and indicated that the module helped determine the relation between an organisation and a contractor in 71.6% of the cases. In 28.4% of the cases, the web module was unavailable to determine the nature of the relationship.

Based on the results of the pilot and the ongoing political discourse, further developments regarding the Wet DBA, and possibly the enforcement thereof, are expected. 

Indeed, there have been plentiful discussions on the way forward with regard to labour market measures in general (including the Wet DBA), but for the time being the Dutch tax authorities will only take action with regard to the Wet DBA (for example imposing tax assessments) in cases of evident and intentional false self employment and when organisations do not (or insufficiently) follow the instructions of the Dutch Tax Authorities within a reasonable period.

Changes to the stock option regime per 1 January 2023

The new law may adjust the taxable moment of employee stock option rights. At the moment, the taxable moment is generally the moment of exercise of the stock options. However, in case the shares obtained with the stock option rights are subject to a sale restriction, employees may not have enough liquidity to pay the taxes that are due at the moment of exercise. Therefore, to make stock options more attractive as remuneration for employees (especially in case of start-ups and scale-ups), the amendment will defer the taxable moment to the moment that the shares (obtained with the exercise of the stock option right) can be traded. At the same time it is still possible, by election, to choose for taxation at exercise.

‘Working from home’ allowance

As a result of COVID-19, many employees have started working from home. The general expectation is that a large group of employees will continue to work (partly) from home. In order to accommodate employers that want to provide an allowance to their employees for the additional costs of working from home, a new fixed exemption under the work-related costs scheme will be introduced. From 1 January 2022, employers can use the already existing fixed exemptions and the new ‘working from home’ allowance to accomplish that.

30% ruling cap to be introduced

Ahead of Budget Day 2022, the government released a Spring Budget Memorandum which proposed a change to the 30% ruling facility. Certain employees who come to the Netherlands from another country to work can receive a maximum of 30% of their wages tax-free based on this 30% facility (expat facility). It has been proposed to cap this scheme up to the norm of the Standards for Remuneration Act (2022: 216.000 euros). This new measure will be phased in over the course of a transitional path of three years starting 2024. How the transitional arrangement will be structured has not been specified in the Spring Budget Memorandum. 

Travel allowance

Per 1 January 2023, the tax-free travel allowance will be increased from 19 cents per kilometre to 20 or 20,5 cents per kilometre. The exact amount is yet to be determined. It is expected that per 1 January 2024 the allowance will be increased to 23 cents per kilometre. 

Adjustments Box 2 expected as of 1 January 2024

In addition to the proposed changes to the 30% ruling, the Spring Budget Memorandum also included a proposal to adjust the rates and available credits in Box 2 (income from a ‘substantial interest’). Please see the main changes below. 

  • Introduction of two tax brackets 

Two tax brackets will be introduced in Box 2 as of 2024: a basic rate of 26% for the first 67.000 euros in income per person and a rate of 29.5% for the remainder. 

  • Reduction of the efficiency margin for usual wages from 25 to 15 percent by 2023

Director-major shareholders (DMS) may be obliged to award themselves a salary in accordance with the usual wage regulation. Based on the current efficiency margin, the usual wage for the DMS may be set 25% lower than the wage that is normal for the level and duration of the work of the DMS. According to the Spring Budget Memorandum, this margin will be reduced to 15% as of 2023, as a result of which DMSs may have to grant themselves more usual wages and pay more tax in box 1. 

  • Phasing out general tax credits with aggregate income 

The general tax credit is currently linked to box 1 income and is reduced in accordance with the amount of box 1 income a taxpayer has. Going forward, box 2 and box 3 income will also count towards the reduction of the general tax credit. As a result, people who mainly have income in box 2 or 3 will receive a lower discount on the tax to be paid. It is expected that this measure will be introduced as of 2025.

Adjustments Box 2 expected as of 1 January 2024

In addition to the proposed changes to the 30% ruling, the Spring Budget Memorandum also included a proposal to adjust the rates and available credits in Box 2 (income from a ‘substantial interest’). Please see the main changes below. 

  • Introduction of two tax brackets 

Two tax brackets will be introduced in Box 2 as of 2024: a basic rate of 26% for the first 67.000 euros in income per person and a rate of 29.5% for the remainder. 

  • Reduction of the efficiency margin for usual wages from 25 to 15 percent by 2023

Director-major shareholders (DMS) may be obliged to award themselves a salary in accordance with the usual wage regulation. Based on the current efficiency margin, the usual wage for the DMS may be set 25% lower than the wage that is normal for the level and duration of the work of the DMS. According to the Spring Budget Memorandum, this margin will be reduced to 15% as of 2023, as a result of which DMSs may have to grant themselves more usual wages and pay more tax in box 1. 

  1. Phasing out general tax credits with aggregate income 

The general tax credit is currently linked to box 1 income and is reduced in accordance with the amount of box 1 income a taxpayer has. Going forward, box 2 and box 3 income will also count towards the reduction of the general tax credit. As a result, people who mainly have income in box 2 or 3 will receive a lower discount on the tax to be paid. It is expected that this measure will be introduced as of 2025.