EAFS consulting BV are a Dutch Payroll consultancy for contractors.

Each country has its own unique spin on payroll, social security and income taxation. The Dutch market is no exception, with the documentation and procedures often being complicated and time consuming.

The Dutch tax authorities ruled in 1997 that any foreign company directing employees or contractors to an assignment within The Netherlands are seen as having 'fictitious residence' for tax purposes. What this means is that any employee on placement or assignment in Holland or The Netherlands are subject to Dutch income tax, right from the first working day. This requires the foreign company in question to set up a payroll administration and ensure the correct tax and social security are paid every month.

If the company doesn't undertake these requirements for the certain individual then the client responsible for the employees in The Netherlands is held liable for any tax debt incurred. The consequences can be large and costly.

Euro Consulting BV are specialists in dealing with Dutch Payroll and can assist in all stages of procedures to safeguard legal compliancy and warrant money saving within Dutch law.

Rules around Dutch Payroll Administration

Identification

It is imperative that the identity of each individual employee is established before making them available to the Dutch labour market. It is also heavily recommended that the employees' identity is established before the beginning of their start in the Netherlands. This can be in the form of a valid identity card, such as a passport, an EU Identity card, EEA or EU residence documents I - IV or a refugee passport.

It is advisable to note that establishing an identity from a driving license alone is forbidden. Furthermore, if an identity cannot be established in the accepted manners then a higher wage tax will be withheld.

Dutch SOFI Number

The Tax and Customs Authorities assign each individual taxpayer an individual Social and Fiscal Number - also known as a SOFI Number.

A person who doesn't live in the Netherlands is still taxable by the Dutch Government if they work within the country's borders and, therefore, they have to apply for a SOFI number also.

There are various tax offices that can deal with applications, ranging from the 'Alkmaar' office to the 'Zwolle' office.

When applying for a SOFI number, the applicant must submit an identity card with validity. Accepted forms of ID include a passport, EU Identity Card or a national identity card from a country within Europe.

Please be advised that a driving licence will not be accepted as a valid ID card.

Individuals who don't come from a country within the European Union or the EEA (Liechtenstein, Iceland, Norway or Switzerland) should hold a valid residency permit containing a statement highlighting that they are permitted to work alongside a valid work permit. These should be submitted when applying for a SOFI number.

Calculating Dutch Payroll Tax

Payroll taxes should be calculated from all forms or any remuneration that the employee receives during, and on the basis of, their employment tenure. These main forms are salary, overtime pay, holiday pay, 13th month's salary and commission alongside anything else paid to an employee as return for work services.

Tax-free expense allowances relating to non-resident employees, sustained in exercising their employment within The Netherlands, can be split into two sectors. The first is 'extraterritorial costs', with extra monetary expense for living outside the individuals' country of origin. This includes double housing costs and traveling costs between a home country and The Netherlands. Certain persons may be eligible under the 30% ruling facility in respect of these costs.

The second sector is 'Other Costs', this covers the cost of commuting if applicable, industrial clothing and professional literature and paperwork.

The 'Wage Tax, National Insurance Contributions and Employee Insurance Contributions' manual issued to agents and clients list all tax-free allowances, noting that most cost allowances are part of the wage packet and are therefore not exempt from Dutch tax under law.

As an employer, it is possible to pay a tax-free reimbursement for any costs incurred by the employee or contractor in line or connection with his or her work; if it can be displayed and demonstrated that the costs applied for reimbursement where actually paid for in the first place.

It should be noted that the original invoices, receipts and bills showing all incurred financial costs need to be retained and kept with the accounts and that expense allowances can only be reimbursed on the basis and permission of Dutch law. Any difference in rules or amounts are completely irrelevant if the employee or contractor is working in The Netherlands - working on Dutch soil results in all relevant Dutch tax laws.

Dutch 30% Ruling

It is possible, for some expatriates, to work under the 30% ruling (or in Dutch: 30% regeling). This can be incredibly advantageous as, overall, the amount of income taxable will be drastically reduced. Euro Consulting BV are specialized in obtaining the 30% ruling for expatriates and can assist with the entire procedure.

In order to obtain the 30% Ruling, certain requirements have to be met. The expatriate has to be an employee who is employed in another country by an employer or sent out to an employer within the same group of companies at management level. They also have to be specific in expertise within an area that is lacking in suitable and qualified individuals. Payment to employees of an extraterritorial nature in order to compensate and prevent expense outside the country of origin (in relation to employees entering at the joint request of the employee and the employer) will be considered as remuneration for extraterritorial expenses up to 30% of the sum of the gross wage or salary received and on tuition fees.

Tuition fees covering payments for children related to the expatriate to partake in secondary or primary school education within international schools or establishments can be applied for, up to the amounts charged by the educational establishment along the lines of its rates for teaching. Costs involving accommodation are excluded but traveling expenses are included.

It is not permitted to split the aforementioned gross salary within the employment agreement for a taxable part of 70% and a tax-free part of 30%. The gross wage or salary has to be deduced to 70% of the total, of which on top of there is a tax free remuneration of 30% of the total to be paid. The consequence of this format is that all rights based on salary will be reduced also - such as pension or social security.

Furthermore, an appendix towards the agreement of employment has to be made. Euro Consulting BV can assist with this entire process.

Specific Skills and Expertise in The Netherlands

Whether or not an employee or contractor is in possession of the specific skills and expertise required is subject to an evaluation. This is judged on the level of education of the expatriate, the experience of the expatriate and the salary of the position concerned.

Any employee or contractor working in middle or higher management in relation to an international concern (holding at least two and a half years experience in that concern) who is sent into the Dutch job market will be seen as having specific skills, expertise and experience considered scarce within The Netherlands.

Term Time Allowable

For contractors and employees, the term allowed for this scheme is a maximum of ten years. This starts from the first day of employment through the employer.

If the particular entered employee or contractor should no longer hold the expertise and/or skills considered rare in the Dutch job market then the term is reduced to no less than five years. Once starting the sixth year, the tax authorities can request the employer demonstrate why the employee has to be considered an entered expatriate employee.

Change of Employer

If the situation arises where an expatriate contractor or employee should have a different employer during their term in The Netherlands, then the 30% scheme will remain in action at the joint request of the employer and the employee for all remaining time.

However, if the transition between the end of agreement with one employer and the beginning of another is longer than three months then severe complications can arise. It will also be required for the new employer to prove the contractor or employee is to be identified and designated as an entered employee.

Prior Stay within The Netherlands

The term will be reduced accordingly should an employee have worked or stayed within Dutch borders prior to their next employment start date. If the prior stay or employment finished over 15 years ago then it is not taken into account. If the period of employment or stay ended over ten years ago but under fifteen years ago then it will not be taken into account as long as the individual has not entered the country as an employee for a decade.

Starting Date in The Netherlands

If there is a request made within four months of the employment start date as an expatriate and extraterritorial employee, a request for application to the 30% scheme or continued application can be made to the Heerlen tax office.

If the request is made later than four months, the decision will apply on the 1st of the month following the acceptance from the tax office.

In the situation where there is a reduction of term, the time period will be rounded into full calendar months.

Non-Residency Status

Any expatriate qualifying as a resident Dutch taxpayer can opt to be taxed as a 'deemed non-resident taxpayer'. By doing this, the contractor or employee doesn't need to report investment income, if it isn't Dutch sourced (such as real estate), to the Dutch Revenue.

Documentation Required for Dutch 30% Ruling

If you need to file an application for the 30% ruling in The Netherlands, you will require:

A dated and signed power of attorney of the employer and employee.

A CV for the Employee

A completed application for the 30% Ruling

A job description and letter of rarity.

Euro Consulting BV

At Euro Consulting BV, We can assist and take care of applications for the 30% Ruling alongside other formalities in The Netherlands.

Euro Consulting BV can take complete control over administration and Dutch payroll when working in The Netherlands. We can also take full jurisdiction of dealings with the Dutch Tax and National Security Office. Fully specialized in the Dutch labour market, we can offer services through our BV, ensuring legality while helping you to gain the best possible marketplace retention rate. We are specialists in obtaining and implementing the 30% ruling, generally considered to be the most essential part of tax planning within The Netherlands.

Social Security and Tax are deducted at source, calculated on the tax card basis, submitted for each individual at the beginning of every fiscal year.