The Netherlands – tax environment for remote employees
Published on 2020-02-06 by Marek Siarkiewicz.
Holland, The Netherlands, or rather the Kingdom of the Netherlands, is a country where, as many historians believe, capitalism was born.
The country is over 15 times smaller than neighboring France, but it is not reflected in the number of inhabitants, as the population density is high (414 people have sq. km). Out of 17.3 million inhabitants, less than 80% have Dutch roots.
Of this number, not much, because just over 7,000. are individuals registered on popular freelance websites.
Freelancers in the Netherlands are required to register a company
As a Dutch tax resident Freelancer, known in the Dutch as zelfstandige zonder personeel (ZZP'er), you must register with the Dutch tax and customs administration (Belastingdienst) to obtain a VAT number (BTW in Dutch). However, a freelancer as such is not a legal form and, therefore, you must still open a business, for example a sole proprietorship (eenmanszaak) or a limited company (besloten vennootschap, BV).
Therefore, there is no good way to avoid registering as an entrepreneur unless you decide to operate on the black market.
The situation is therefore different than in some countries of Central and Eastern Europe and southern Europe, where freelancers who do not run companies are allowed to conclude simple civil contracts with their clients. This is the case in Poland, Bulgaria and Macedonia.
Bulgaria - tax obligations for freelancers
Northern Macedonia - tax obligations for freelancers
There is a way to freelance without registering and it’s widely used. It is called "payroll" companies that act as intermediaries between employers and employees. We wrote about it in the full version of the report about the Netherlands. Scroll down to download it.
What if I am an immigrant?
Whether your income is taxable depends on your taxation residency; if you're a Dutch tax resident you must provide total income and assets worldwide. This means that you should also declare any foreign company.
Of course, there are adequate rules in the Netherlands regarding the avoidance of double taxation.
In the Netherlands, health insurance charge is compulsory
Everyone in the Netherlands is obliged to contribute to the healthcare system (Zorgverzekeringswet, Zvw) and to pay health insurance contributions. The system is constructed on the free market terms, so you can choose from many offers. The lowest price is around € 90 / month.
In addition, freelancers must pay an additional income-dependent ZVW contribution.
Income tax is high, but it includes social contributions
Income tax (inkomstenbelasting) is calculated on the basis of a combination of income and personal circumstances. It is divided into 3 groups (called "boxes"):
1) income from salaries and real estate.
2) income from significant participation in business activities.
3) income from savings and investments.
The business profit of a freelancer is part of 'income from salaries and real estate'. From 2020, new tax regulations apply. In "box" 1, two tax thresholds are distinguished:
- for an annual income below € 68 508 the tax rate is 37.35%;
- for an amount of over € 68 508 the tax rate is 49.50%.
As for the other tax areas ("boxes"), in the second position the tax rate is 26.25%, and in the third - 30%.
As you can see, the tax rates are high, but it should be taken into account that this is the only tribute imposed by the state (except for the health care tax).
Do I have to be a VAT payer?
Dutch VAT (BTW) is divided into three categories. Depending on the type of goods or services the company deals with, the rate can be 0%, 9% or 21%. For entrepreneurs who do not have large amounts of VAT due, the rules for small businesses (in Dutch Kleineondernemersregeling) apply. In practice, the smallest entrepreneurs pay low VAT or do not pay it at all.
Are you eager to know more?
There’s more to find out. Particularly about:
- the only legal way for a freelancer to avoid registering a company, or
- what social contributions are obligatory and what are facultative,
+ all the recap of all the information in a clear, table form.
Download a full report about taxes for freelancers in the Netherlands.
Do you need to hire a Dutch freelancer?
Do you have a remote worker from the Netherlands or are you pondering how to legally hire one? Consider Useme - with us the whole HR process is completely non-engaging and thus simple and trouble-free for both sides.
Propose your remote co-worker to issue an invoice as an individual or use our API to account a whole team of Freelancers. Useme will take care of the formalities, payment security, transaction history, file storage and more.
Any questions? Contact us at firstname.lastname@example.org.