News - Netherlands

Netherlands - February 2013

Employment tax and social security contributions - what changed on 1 January 2013?

Uniform rules on wage definition ("WUL")

On 1 January 2013 the WUL came into force. The most important changes are:

  • The income-related contribution under the Dutch Health Care Insurance Act has become an employer’s contribution. This contribution is not a taxable benefit to the employee.
  • If an employee has more than one employer, repayment of employee insurance contributions and the income-related contribution under the Dutch Health Care Insurance Act will no longer take place. The maximum income base (for 2013: EUR 50,853) is for each employee applied per employer. Hence, the social security burden may increase in the event of a salary split.
  • Dutch group companies may take over the liability to withhold wage tax and social security contributions from a foreign group company that posts employees to the Netherlands. In order to benefit from this administrative relief the company must apply for a ruling with the tax authorities.

Employer tax of 16%

In 2013, a temporary employer tax applies for the duration of one year. If in 2012 the (fixed and variable) taxable salary from the current employment of an employee exceeds EUR 150,000, an employer tax of 16% will be applied to the excess on 31 March 2013. The employer is not entitled to recover this tax from the employee. If an employee has had more than one employer in 2012 and received a salary of less than EUR 150,000 from each of them, the employer tax does not apply. An exception applies to multiple employments within a group of companies; these salaries will be added together for the purpose of testing whether the employer tax applies.

Employer tax rate for excessive golden handshakes increased to 75%

If employees in the top income category (currently above € 531,000) leave employment, their employer must pay tax on any so-called “excessive redundancy pay”. Excessive redundancy pay (the amount in a year over a threshold) is calculated by reference to, in principle, income received in the second calendar year (t-2) before termination of the employment (i.e. the threshold). Redundancy pay is defined as the excess amount of all income in the year of termination of employment (t) over the threshold, plus the excess amount of all income in the year preceding the year of termination of employment (t-1) over the threshold. To the extent the sum of both excess amounts exceed the threshold, the redundancy pay is excessive and thus subject to the employer tax.

Calculation of excessive redundancy pay – Example

  • An employee leaves his employment on 31 January 2013
  • In 2011 his total taxable income is EUR 720,000 (the threshold amount).
  • In 2012 his total taxable income is EUR 800,000. 2012 income in excess of 2011 income = EUR 80,000 (EUR 800,000 - 720,000)
  • In 2013 his total income is EUR 2,070,000. 2013 income in excess of 2011 income = EUR 2,010,000 (EUR 2,070,000 - 1/12th 720,000).
  • "Termination payment" is EUR 2,090,000. To the extent it exceeds taxable remuneration in 2011 (i.e. EUR 720,000) it is considered 'excessive'. Excessive part is thus EUR 1,370,000. Employer must pay additional tax of EUR 1,027,500 (EUR 1,370,000 x 75%). The rate of tax has been increased from 30% to 75%

New regulations and the law 30% ruling

a. 150 kilometre threshold

Employees moving to the Netherlands may qualify for a portion of their income to be received tax-free (30% ruling). In order to qualify for the 30% ruling, employees must have lived more than 150 km from the Dutch border, during more than two-thirds of the 24 months period preceding their employment in the Netherlands.

This has been challenged in court and a decision by the Supreme Court will be required.

b. End of term - subsequent payment of salary

Starting in 2012, the 30% ruling can apply for a maximum term of eight years commencing on the first day of employment. Due to the lack of clarity around the end of the term, the law was therefore amended to set the end of term - with retrospective effect from 1 January 2012 - to the last day of the pay period after the pay period in which the employment ended. This gives employers an additional pay period, in most cases one month, to settle holidays, holiday allowance etc. All salary components paid out thereafter, including option benefits and profit distributions, cannot benefit from the ruling.

For further information or to discuss any of the issues raised, please contact Hans van Ruiten on +31 10 224 64 18 or Marieke de Vries on +31 20 578 51 76 at Loyens & Loeff, Amsterdam -


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