The Netherlands: Dutch Budget 2022 – New Tax brackets and Tax Free Allowances

Posted on 3rd January, 2022

Estimated reading time 3 minutes

Dutch wage tax rates have been updated in the Dutch Budget 2022 as have the tax free limits of the Employment Costs Scheme which allows employer to provide tax free allowances and benefits in kind to employees. New Dutch income tax rates as at 1 January 2022 The income tax and social security rates applicable for the fiscal year from 1 January, 2022 are set out below.
Taxable income bracket Income tax rate (%) National Insurance Contribution rate (%)
Bracket EUR EUR
1 - 35,472 9.42 27.65
2 35,472 69,398 37.07 -
3 69,398 - 49.350 -

Dutch Employment Cost Scheme 2022

The Dutch Employment Costs Scheme allows an employer to spend part of the total taxable wage of all the employees within the company on allowances, benefits in kind etc. for its employees without incurring any tax liabilities. As of 1 January 2022, the tax-free budget is as follows:
Tax band (EUR) Tax free budget
0 – 400,000 1.7%
Over 400,000 1.18%
If for example, the total of taxable wages is EUR 1,000,000, then the tax free budget is EUR 13,880 (which is EUR 400,000 x 1.7% + EUR 600,000 x 1.18%). If the employer only spends a maximum of EUR 13,880 on allowances and benefits in kind to its employees, then the employer may provide these tax free without triggering payment of a final wage tax levy. However, if the amount is for example EUR 20,000 then the tax free budget is exceeded. For the employer this results in paying a final levy of 80% on the excess of EUR 6,120. Please note that a COVID-19 facility in 2020 and 2021 to provide a temporarily increased tax-free employment cost budget (3% in first band of up to EUR 400,000) is no longer applicable under the new cost scheme

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This article was produced by Karin Chung, Tax Adviser at Loyens & Loeff, the Netherlands, a CELIA Alliance member firm. For further information or if you have any queries relating to the content of this communication, please contact us. CELIA Alliance CELIA Alliance members are identified here. Members of the CELIA Alliance are each independent law firms and do not practice law jointly with any other member of the CELIA Alliance. "CELIA Alliance" and "CELIA" are not trading names. For more information about the CELIA Alliance click here. Disclaimer Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this newsletter. For further legal information click here. Circular 230 disclosure To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Copying If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.