Changes for individuals
The main changes for individuals that were implemented into the Dutch (tax) legislation in the last few years are:
- As of 1 January 2020, the Balance Employment Market Act (WAB) will enter 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
- 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.
From 14 December 2019, with retroactive effect from 9 February 2017, a new ministerial degree 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.
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.
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).
- Since 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 abolishment of the VAR 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.
Currently, a tax status independent contractors transitional period applies, during which the Dutch tax authorities will only enforce legislation in organisations in case of evident and intentional false self-employment. As of 1 January 2020, however, the Tax Administration can also enforce legislation if organisations do not (or insufficiently) follow instructions from the Tax Administration with respect to their labour relationships with contractors, within a reasonable period of time.
The Dutch government is currently developing a web module for clients of contractors, the aim of which is to provide clients with certainty in advance that no payroll taxes need to be withheld and paid.
The use of the web module will not be mandatory; it is only a tool for clients and contractors to get (more) clarity about their working relationship. If the web module leads to a 'client statement', this gives the client the assurance that no payroll taxes need to be withheld, provided the questions have been answered truthfully and the contractor is working in accordance with this. The 'indication of employment' will have no legal consequences, but according to the assessment of the web module there is a real chance that there is an employment relationship. Finally, the outcome may be that 'no judgement can be made'.
The web module has not yet entered into force.
Supervisory board members
During the parliamentary process of the abolishment of the VAR, 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.