Why to carefully consider to voluntarily register as a withholding agent for Dutch wage taxes?
National legislation stipulates that wage tax in the Netherlands is levied on withholding agents. When you as a (foreign) employer hire a Dutch employee, you can be regarded as a withholding agent. This is however not always an obligation. In a lot of scenario’s taxes over Dutch taxable income out of employment can be paid to the Dutch tax authorities by the employee via his personal Income Tax Return. This is why you should consider this option and not voluntarily register as a withholding agent for Dutch wage taxes.
Paying Dutch wage taxes and national insurance contribution via Income Tax Return
Does your company not have a registered office, permanent establishment or representative in the Netherlands? You do not have to register as a Dutch withholding agent. The employee pays the Dutch wage tax and national insurance contributions via the personal income tax return.
Why would you not voluntarily register as withholding agent for Dutch wage tax?
If you do not voluntarily register as withholding agent the Dutch Wage Tax Act doesn’t apply to you. The Dutch Wage Tax Act contains very detailed and complex rules and regulations, such as the Work Related Expense Scheme, regulations regarding pension and regulations as to the maximum severance payments. If you don’t voluntarily register as a withholding agent for Dutch wage taxes, these rules and regulations don’t apply. This can save your company and employee a lot of Dutch wage taxes. Besides this it saves the costs and administrative burden for running a Dutch wage tax administration.
A downside to this option could be the responsibility for the employee paying the Dutch wage tax and national insurance contribution. As an employer you can offer the employee assistance on filing these tax returns. In general these taxes can also be paid in monthly amounts via a preliminary Income Tax Return.
When do you have the obligation to register as a withholding agent?
It is not always possible to pay the taxes and national insurance contributions via an Income Tax Return. It these 3 scenario’s you will have to register as withholding agent.
- You have your registered office in the Netherlands:
If you as an employer have your registered office in the Netherlands and your employee is a tax resident of the Netherlands, you will be regarded as a withholding agent for the purposes of wage tax. If your employee is not a resident of the Netherlands, then it depends on the country in which the employment is performed whether you are liable for wage tax in the Netherlands.
- You have a permanent establishment or permanent representative in the Netherlands:
If you as an employer have a permanent company site in the Netherlands, such as an office or shop, then this will probably be regarded as a permanent establishment as defined by Dutch tax legislation. If you as an employer have a permanent establishment in the Netherlands, you are subject to withholding wage tax in the Netherlands.
If your employee is authorised to conclude contracts and/or negotiate about contracts in the Netherlands and actually performs these activities, then the employee is probably regarded as a permanent representative as defined by Dutch tax legislation. If you, as an employer, have a permanent representative who works for your company in the Netherlands, you are subject to withholding wage tax in the Netherlands.
- Posting of employees
As soon as an employer posts personnel to perform work in the Netherlands for a third party, there is an obligation to withhold Dutch wage tax and national insurance contributions. This applies, for example, in the case of an employment agency.
More information
Are you an employer established abroad and do you want to know more about the obligations towards employees in the Netherlands and/or do you want support in this area? Please contact Clea Cremers, tax advisor, by phoning 077-3217715 or send her an email
