On 20 September, the day of the opening of the Dutch Parliament (Prinsjesdag), the Dutch Government announced its plans for the tax year 2017.

The issues relevant to HR departments

The issues most relevant to Dutch employers and their employees are as follows:

• Adjustments to tax bands and rates

Tax bands	Proposed new rates for 2017
Up to EUR 19.982	36.55% (8.90 % tax + 27.65% national insurance)
EUR 19,982 – EUR 33,791	40.80% (13.15% tax + 27.65% national insurance)
EUR 33,791 – EUR 67.072	40.80% (tax only)
Over EUR 67.072	52% (tax only)

• These represent slightly higher tax rates for Dutch tax payers in the second and third band.
• Adjustments to various tax credits were announced.
• Supervisory directors of Dutch companies will no longer be classified as employees, and so companies will no longer be required to deduct employment taxes when paying their fee. This has been an option as of 1 May 2016 if parties agreed to such.  As of 2017, the new rules will become compulsory and so applicable for all supervisory directors.
• On the basis of International Dutch tax treaties, the Netherlands usually has the right to tax the full remuneration of supervisory directors of Dutch companies.  As the fees of non-resident supervisory directors will no longer be taxed with employment taxes the national Dutch income tax law will be adjusted to make sure such fees will be fully subject to Dutch income tax.
• Non-Dutch companies seconding employees to the Netherlands could transfer their obligation to deduct employment taxes to a Dutch group company thus avoiding to have to run a Dutch payroll themselves.  The requirement of the employees being seconded will now be skipped.
• All tax non-residents in the Netherlands will be entitled to the same personal allowance in box 3 (where a notional income from specific assets in the Netherlands is taxed) as tax residents.  This is a codification of an earlier approval of the Ministry of Finance dated April 2016.

Who is impacted by these changes?

Individuals

• Dutch tax payers will pay slightly higher tax rates.  Tax rebates are income-related and calculated over a capped income.  Higher earners will receive no tax credits, but the marginal tax rate of 52% will kick in at a somewhat higher income level than in 2016.  Please note that the marginal tax rate for expat employees enjoying the 30% ruling remains the same (36.4%). 
• Tax non-residents can claim a personal allowance in box 3.  They have to check whether this is possible for earlier tax years too.

Employers in the Netherlands

• Companies have to carefully review the situation of supervisory directors.  See our April article referred to in the Resources section below.  Opting-in may be attractive in order to benefit from the 30% ruling under the Dutch expatriate tax regime.  Companies have to apply for opting-in with the Dutch tax authorities.

Supervisory directors of Dutch companies

• Supervisory directors will have to file Dutch income tax returns to report their remuneration, unless they opt for being treated as an employee.  They have to carefully review their situation to make the right choice.

Non-Dutch employers

• Non-Dutch companies whose employees work in the Netherlands should check whether they have payroll obligations in the Netherlands and if so, whether they can seek the assistance of a Dutch group company for this.

What happens next?

The proposals will now be debated in Parliament and any further changes should be confirmed by the end of the year.

Further information

Please contact Rina Driece (Rina.driece@loyensloeff.com) or on +31 (10) 224 64 24 to find out more about how we can help.

Resources

https://www.celiaalliance.com/news/newsbank/wage-tax-social-security-obligations.html.  

https://www.celiaalliance.com/wage-tax-obligation-for-supervisory-board-members-abolished.html.

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