How to Manage Netherlands Payroll Taxes (2025 Guide)

Expanding into the Netherlands unlocks access to one of Europe’s most productive, digitally-skilled workforces, and a business climate built for global scale.

But for payroll teams and founders managing compliance across borders, the Dutch system presents real complexity. Between progressive wage taxes, layered social insurance schemes, and cross-border considerations like the 30% ruling or A1 certificates, getting payroll right requires local familiarity and precision.

Miss a deadline or misclassify a contribution, and you're looking at penalties, rework, and potential reputational risk.

Whether you're managing payroll in-house or working with Deel for fully-managed payroll in the Netherlands, you’ll find exactly what you need to operate with confidence in one of Europe’s most advanced employment markets.

This article explains key information about Netherlands payroll taxes, covering laws, regulations, calculation methods, and best practices to help you navigate payroll management in this unique employment landscape efficiently.

Types of Netherlands payroll taxes

As an employer hiring workers in the Netherlands, you are responsible for paying payroll taxes to the Dutch Tax and Customs Administration (Belastingdienst). Payroll tax in the Netherlands includes:

Wage tax

Wage tax (loonbelasting) is withheld from employees’ employment earnings as an advance payment on their overall income tax liability. It includes earnings such as salary, pensions, bonuses, allowances, and stock options.

In the Netherlands, wage tax is charged at a progressive rate based on income bracket. The wage tax rate for 2025 is as follows:

You must calculate and withhold the correct wage tax from employees’ paychecks every month and remit it to the Dutch tax authorities.

National insurance contributions

National insurance contributions (Volksverzekeringen) are mandatory taxes used to fund social security programs. All employees in the Netherlands must contribute to national insurance schemes regardless of their citizenship status.

National insurance contribution rates are reviewed annually by the Ministry of Social Affairs and Employment. The rates for 2025 are as follows:

Contributions are levied on employee salary up to a maximum of €38,441, and the payable tax is capped at €10,628 per annum. You must deduct each employee’s national insurance contributions from their salary monthly and remit them to the tax authorities.

Employee insurance contributions

Employee insurance contributions (Werknemersverzekeringen) are a compulsory tax that employers must pay on behalf of every employee. It is used to provide workers with temporary income during periods when they are unable to work.

Contribution rates for employee insurance are set twice a year, in January and in July. Usually, the rates depend on the employer’s specific industry and are payable on income up to a maximum of €75,864. These are the basic or average estimated rates for 2025:

You are to calculate and pay employee insurance premiums yourself. You cannot deduct the contributions from your employee’s salary.

The return-to-work fund (WHK) is the only exception to this rule. The law permits you to deduct up to 50% of the differentiated premium for WHK from an employee’s net wages.

See also: The Netherlands Makes Work From Home a Legal Right—Now What?

Health insurance contributions

Health insurance contributions (Zorgverzekeringswet, ZVW) are mandatory taxes that all employees and employers must pay in compliance with the statutory requirement that workers carry Dutch basic healthcare insurance to cover standard medical expenses.

Employees are to pay a nominal annual contribution of €1,900 to their compulsory basic insurance provider.

As an employer, you’re obligated to make an income-dependent contribution of 6.51% of the employee’s wages up to a maximum of €75,864, resulting in an annual payment cap of €4,938. This is to be withheld from the employee’s salary.

The Dutch standard health insurance scheme differs from traditional private health insurance, which workers can choose to obtain as a supplement to their compulsory insurance policy. The former typically does not cover or only offers partial coverage for certain healthcare services such as dental treatments, contraception, and physiotherapy.

Expatriate payroll considerations in the Netherlands

If you’re employing a non-Dutch citizen in the Netherlands, there are specific factors to consider when planning payroll for these employees.

The 30% ruling

The 30% ruling grants foreign workers tax-free reimbursement of up to 30% of their taxable salary to cover extraterritorial expenses incurred in relocating to the Netherlands and enable them to adjust to the country’s higher cost of living.

This partial tax break can be applied for 5 years on a salary of up to €246,000. However, starting from January 1, 2027, the 30% ruling will be adjusted to 27%.

To be eligible for the 30% ruling, the employee must meet these conditions:

• Have specific expertise that’s hard to find in the Dutch labour market.
• Earn an annual salary of at least €46,660, not including the tax-free allowance in the Netherlands
• Be younger than 30 with a master’s degree and an annual salary of at least €35,468, not including the tax-free allowance in the Netherlands
• Be conducting scientific research at a designated research facility or be a doctor training to become a specialist—no salary rule applies in this case
• Lived at a distance of more than 150 kilometers from the Dutch border for more than 16 months in the 24 months preceding your first working day in the Netherlands
• Have not lived in Belgium, France, the United Kingdom, Luxembourg, and parts of Germany. The living distance conditions are relaxed for PhD holders

To apply for the 30% tax ruling, both the employer and the employee must submit a joint application to the Dutch Tax Office within four months of the employee’s resumption of work in the Netherlands.

The ruling results in immediate payroll savings—for up to 5 years—because taxes like employee insurance contributions will be calculated using the worker’s discounted salary after the ruling rather than their actual compensation package

See also: How to Hire Highly Skilled Migrants in the Netherlands

Cross-border employment

When you have an employee working across borders, the European Regulation No. 883/2004 or a social security agreement with their home country will determine whether the employee qualifies for Dutch social insurance schemes.

If they do, you are required to pay the employee’s insurance contributions and your employer contribution for their health insurance (ZVW). These regulations are meant to ensure that an employee isn’t uninsured or doubly insured in multiple countries within the EU.

Employees who are socially insured in another EU or EEA country or Switzerland under the European Regulation No. 883/2004 can obtain an A1 certificate in their country of residence, stating that they are already insured. This certificate must be obtained before they resume their Dutch employment.

Employees insured in a country outside of the EU, EEA, or Switzerland, according to a social security agreement, can apply for a Statement of Applicable Legislation, which fulfils the same purpose as an A1 certificate.

In both cases, you no longer have to withhold or pay social insurance contributions in the Netherlands on behalf of these employees.

Where neither the European Regulation No. 883/2004 nor a social security agreement applies, the national legislations of the Netherlands and the employee’s country of residence will be used to determine where they are socially insured.

Handling tax treaties and double taxation issues

There’s also the question of which country the employee has to pay wage or income tax: the Netherlands, their home country, or both?

The Netherlands has tax treaties with various countries to protect employees against double taxation when engaging in cross-border work.

As a standard rule, most treaties empower the country in which the employee works to levy tax on the salary they earn while working in that country.

There is one exception known as the 183-day rule, and it prescribes that the state in which the employee lives (home country) can levy tax when the employee meets these three conditions:

• They do not stay in the country of work for more than 183 days (including weekends and holidays) during a certain period. Depending on the applicable tax treaty, this period may be a tax year, a calendar year, or a consecutive 12-month period
• They are paid by or on behalf of an employer that is not established in the state where the employee works
• They do not work in a permanent establishment of the employer in the state where the employee works

Where there is no existing double taxation treaty between the Netherlands and an employee’s home country, both states may be entitled to levy income tax. However, Dutch legislation will determine whether your company has to withhold and pay tax for the employee in the Netherlands.

Additional factors impacting Netherlands payroll

Holiday allowance

You are legally required to pay your employees in the Netherlands holiday allowance (Vakantiegeld) amounting to 8% of their gross salary for the past year, including:

• Overtime
• Commissions
• Performance bonuses
• Irregular working allowances

Here are some common practices relating to the payment of holiday allowance in the Netherlands:

• It is usually paid in May or June, except when your employee gives you written consent to pay their allowance at a different time
• If an employee is not entitled to holiday pay under a CAO, you must pay them an allowance that’s at least 108% of the minimum wage. If you only pay minimum wage, then you must pay the standard 8% holiday allowance
• If an employee earns above three times the minimum wage, you can agree in writing not to pay holiday allowance or to pay a lower amount
• If a CAO does not cover you, you can create holiday pay agreements in writing with your employees, but you must always pay at least the amount mandated by law

13th-month pay and bonuses

It’s common for employers in the Netherlands to offer 13th-month pay or a year-end bonus as part of their employee perks, but doing so is optional.

In some cases, your employees may be entitled to receive 13th-month pay or a year-end bonus under a CAO.

If you choose to offer 13th-month pay, you must pay employees an amount equal to their gross monthly salary. There is no fixed amount for year-end bonuses, so you can decide how much to pay on your own or seek your employees’ input.

For both the year-end bonus and the 13th-month, you must withhold wage tax and national insurance contributions on the amounts you pay. To calculate your payroll tax liability on these payments, you have to search the Netherlands payroll taxes table and use the rates for special rewards for the given year.

Here are some common industry practices to consider when navigating 13th-month and year-end bonuses in the Netherlands:

• Most companies pay year-end and 13th-month bonuses in November or December
• You cannot decide to pay a 13th-month or year-end bonus to certain employees, but not others. Your choices are not to offer it at all or to offer it to all your employees
• You have to pay part of the 13th-month or year-end bonus for the year to employees who resign or are dismissed

Expense reimbursements

Employees are allowed to claim some tax-free allowances on their personal income tax return. They include:

• Alimony: Employees can deduct maintenance payments to a former spouse
• Life insurance premiums: Tax deductible only if the employee can prove that the pension rights or capital they have built up to the date of the claim are lacking
• Childcare assistance: Every family with at least one child under 18, including adopted and stepchildren, is entitled to a tax-deductible child allowance (AKW) paid per quarter
• Medical and disability expenses: This includes costs for sickness, disability, or other health situations affecting the individual or their close relatives
• Charitable contributions: Donations made to charity are deductible; however, deductions for certain charitable expenses are capped or subject to thresholds
• Education expenses: Money spent on educational pursuits is deductible, but certain costs are capped or subject to thresholds

The Work-Related Costs Scheme (WKR)

Under the work-related costs scheme, you are allowed to reimburse certain business expenses, or offer benefits in kind, and provisions to employees tax-free up to a fixed amount of your total taxable wages. This fixed amount is referred to as the discretionary scope or discretionary margin, and it’s reviewed every year.

For 2025, the discretionary scope is 2% on the first €400,000 of your total taxable employee wages and then 1.8% on any remaining amount. If your work-related costs exceed the discretionary scope, you will then have to pay a final levy of 80% as wage tax on the excess expenses.

The beauty of this scheme is that it can be used to reduce your Netherlands payroll costs while providing a wide range of benefits to employees beyond regular deductible business expenses or what’s included in the employment contract.

You can use WKR to provide or reimburse for various work-related expenses, including:

• Staff outings
• Parking fees
• Phone and internet use
• Christmas gifts
• Traveling costs above the standard amount

The scheme also allows you to grant specific types of reimbursements and provisions known as specific exemptions to employees without incurring taxes or reducing the value of your discretionary scope budget. These include:

• Home office utilities
• Meal expenses during overtime or business travel
• Certificate of good conduct
• Business travel (€0.23 per km or actual travel costs)
• Professional training and development expenses

Certain other workplace benefits-in-kind called zero valuations can also be provided tax-free without deducting them from your discretionary scope. They include:

• Non-meal consumables like tea and coffee
• Public transport subscriptions
• Company-provided mobile phones
• Lodging and accommodation at the work site
• Desks, copiers, computers, and other office equipment used on the work premises

Corporate taxes in the Netherlands

Dutch resident companies are liable for corporate income tax on the taxable profit from their worldwide income, while non-resident companies are only subject to corporate tax on income generated from Dutch sources.

In the Netherlands, corporate income tax rates are calculated based on the taxable amount and the income bracket it falls into. The standard corporate income tax rate is 25.8% and it applies to income above the set threshold, while the variable rate, which is assessed every year, applies to income below the threshold.

For 2025, the rates are divided as follows:

Companies engaging in research and development activities can apply for the innovation box tax scheme, allowing them to pay a lower tax rate of 9% on positive income from those activities.

As a private or public limited company, you have to file your corporate income tax return digitally each year, at the end of your financial year or within five months from the end of your financial year.

The financial year you use for filing a corporate tax return has to be the same as the financial year in your articles of association.

Tax reporting and compliance in the Netherlands

Understanding and adhering to your payroll tax responsibilities is key to maintaining compliance with Dutch regulations and avoiding penalties. The necessary actions to take to ensure smooth payroll tax administration and reporting include:

• Remit withheld taxes and file payroll tax returns to the authorities on a monthly or four-weekly basis using the Belastingdienst's online portal, payroll software, or third-party payroll services.
• Keep up-to-date records of all employee data and payroll transactions, including all wages paid, taxes withheld, and deducted allowances for each employee.
• Provide employees with their annual wage statements at the end of each calendar year, detailing their total earnings, social security contributions, and tax deductions to assist them with filing their personal tax returns.
• Prepare and submit year-end reports, including your work-related costs scheme declaration, statements of income, and wage tax annual return for each employee to the relevant authorities.

To ensure transparency, you are required to issue employees detailed digital or paper payslips for each period. The payslips must contain the following information to be compliant:

• Gross salary
• Salary components (base pay, bonuses, etc.)
• Pay period
• Type of contract
• Allowances
• Deductions
• Holiday allowances
• Number of working hours
• Employer and employee identification details

Record-keeping obligations

You are legally required to maintain comprehensive business records and keep them for at least 7 years to enable effective audits and compliance checks.

This retention requirement applies to both digital files and paper records, and you must continue to comply with it even if your business permanently shuts down during the specified period.

The records you must keep include:

• Payroll accounts and tax records
• Stock records
• General accounting ledger
• Credit and debit accounts
• Purchase and sales records

Payroll tax deadlines in the Netherlands

Staying on top of important Dutch tax due dates will help you avoid fines and legal troubles.

Failure to meet these filing due dates or fulfil other payroll tax responsibilities can result in business closure, reputational damage, and even prompt employees to take legal action against you. You can also incur serious financial penalties for non-compliance, such as:

Netherlands payroll taxes: Common mistakes and best practices

Businesses in the Netherlands frequently encounter specific payroll challenges that can impact compliance, lead to legal issues, and increase costs. You can steer clear of these pitfalls by implementing the right strategies.

Failing to register as an employer with the Dutch Tax Authority

To withhold and pay payroll taxes for employees in the Netherlands, you need to receive a payroll tax number, a payroll tax return letter, and a letter informing you of your sector, which determines your employee insurance contribution rates.

You cannot file your payroll taxes or benefit from tax schemes without these details, and you can only get them by registering with the tax administration.

Neglecting to provide compulsory employee benefits

Employees in the Netherlands are legally entitled to receive benefits such as:

• Pensions
• Holiday pay
• Overtime compensation
• Paid annual leave and sick leave
• Paid maternity leave, paternity/partner leave, parental leave
• Paid short-term care leave
• Unpaid long-term care leave.

Make sure you stay on top of these benefits and notify employees about them and approaching deadlines for using them (where applicable), even if they do not ask.

Misclassifying employees

Incorrectly classifying employees as independent contractors or vice versa can result in significant fines, back taxes, and other legal repercussions.

Strictly follow the Netherlands’ employment and tax regulations to ensure your employment contracts capture the true nature of the work relationship. Consider factors like the length of the project, how much autonomy the worker has, and the degree of control you exercise over how and when they perform their jobs.

Failing to track overtime

Workers must be compensated for every extra time they work outside of their set work hours. Overtime pay is determined by industry standards, individual employment contracts, or collective labor agreements.

Employees can file underpayment claims and be awarded all their back pay if you do not accurately track and pay overtime. On top of this, you may also be penalized with fines.

Expand your business globally, compliantly, and confidently with Deel

Maintaining payroll tax compliance when hiring in the Netherlands requires an in-depth understanding of local laws, regulations, and cultural contexts to reduce the risk of fines, legal disputes, and increased administrative workload.

By using Deel’s global payroll platform, you can automate payroll calculations, record-keeping, benefits administration, payslip generation, and tax filings, ensuring accuracy and standardized processes.

With done-for-you compliance checks and support from our in-house Dutch employment experts, you can rest easy knowing you're meeting both employee and governmental payroll expectations.

Whether you're looking to run your Netherlands payroll effortlessly in-house or outsource it through an employer-of-record (EOR) service, Deel offers cost-effective solutions to meet your specific business needs.

Book a free consultation with our experts to learn more about how Deel works.