News - Netherlands

Netherlands - March 2022

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

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and 2021 to provide a temporarily increased tax-free employment cost budget (3% in first band of up to EUR 400,000) is no longer applicable under the new cost scheme

Find out more

This article was produced by Karin Chung, Tax Adviser at Loyens & Loeff, the Netherlands, a CELIA Alliance member firm.

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