Any business can act as Employer in the Netherlands. This does not require you to register a local entity, or even a branch (except when you outsource staff to Dutch/EU companies).
Whether you are an established business planning to branch out or a budding entrepreneur keen to launch your venture, one of the most crucial aspects to consider is hiring and payrolling. If your chosen destination for expansion is the Netherlands, it is imperative to understand the local regulations and procedures for employers. This guide aims to provide you with a detailed playbook on how to register as an Employer in the Netherlands and payroll your first staff member, all without involving an accountant.
Table of Contents
Understanding Payroll Tax in the Netherlands
Becoming a Registered Employer
Registering a Foreign Office
Reducing Wage Tax and National Insurance Contributions
Verifying an Employee's Identity
Maintaining Payroll Records
Offsetting VAT Payment Against Payroll Tax
Understanding Work-Related Costs Scheme
Managing Payroll for Temporary Staff or Subcontracted Work
Reporting Payments to Third Parties
Understanding Payroll Tax in the Netherlands
The first step towards effective payrolling in the Netherlands is understanding the concept of payroll tax. In the Netherlands, employers are required to deduct payroll tax from their employees' wages and remit them to the tax authorities. These payroll taxes comprise of:
Wage tax and National insurance contributions
Social security contributions
Income-dependent employer's health care insurance contribution
Having a clear understanding of these components will help you calculate and process your payroll accurately.
Becoming a Registered Employer
Before you can start employing staff, you need to register as an employer with the Dutch Tax and Customs Administration. Upon registration, you will receive crucial documents such as a payroll tax number, a payroll tax return letter, and, if applicable, a letter indicating your sector of operation and the percentage for the Return-to-Work Fund (Werkhervattingskas, Whk).
The payroll tax number is essential for filing your payroll taxes and any other interaction with the Tax and Customs Administration.
Registering a Foreign Office as branch in the Netherlands
If your company's registered office is in another country, you still need to deduct payroll taxes in most instances. In such cases, you must also register with the Tax and Customs Administration. This process ensures that you comply with all the necessary tax obligations for your employees in the Netherlands, regardless of where your company's headquarters are located.
If your company is involved in outsourcing of staff (WAADI), then the registration of a local branch, or even the set up of a local entity, is required. Ofcourse, the branch registration is the simplest solution.
House of Companies has a lot of experience in facilitating foreign companies to obtain a wage tax number in the Netherlands, and become an Employer of Record in the Netherlands. Starting from 295 EUR per year, House of Companies provides an all in fee, to become an Employer of Record!
Reducing Wage Tax and National Insurance Contributions
Under specific circumstances, you may apply a credit to some of your employees' contributions, thereby reducing the full amount of the wage tax deduction. For instance, if an employee is involved in research and development work, you may qualify for the WBSO R&D tax credit. Such measures can help you manage your payroll more effectively and potentially save costs.
Verifying an Employee's Identity
Upon hiring, you must verify and record each employee's identity. This information includes their name, address, date of birth, and citizen service number (burgerservicenummer, BSN). It is crucial to gather all the necessary information before they start working for you. Failure to establish an employee's identity correctly may lead to the application of the anonymous rate (anoniementarief).
Maintaining Payroll Records
Keeping accurate and updated payroll records is a key part of effective payroll management. Data such as employment contracts and other relevant employee information must be maintained in your personnel records. These records will be instrumental in determining the components of an employee's wage, calculating the right contributions and taxes, and filing a tax return.
Offsetting VAT Payment Against Payroll Tax
Under specific conditions, it's possible to offset a VAT payment against a payroll tax declaration. This can be done if you have filed the payroll tax return on time, file your VAT and payroll tax returns in the same period, have no outstanding tax debts, and file your request for offsetting VAT at the latest on the last date that you would be able to file your payroll tax returns.
Understanding Work-Related Costs Scheme
The work-related costs scheme (werkkostenregeling, WKR) allows you to reimburse certain expenses, provide benefits in kind, or make provisions for your employees without tax liability. This scheme applies to several costs, including travel expenses. Understanding the WKR and using it wisely can bring substantial benefits to your payroll management process.
Managing Payroll for Temporary Staff or Subcontracted Work
If you hire temporary staff through an intermediary or subcontract work to a contractor/subcontractor, the intermediary or contractor/subcontractor must pay the payroll tax for these staff. However, if they fail to do so, the Dutch Tax and Customs Administration may hold you liable. It's therefore essential to ensure that all payroll obligations are met, regardless of the employment arrangements.
Reporting Payments to Third Parties
If you hire individuals such as speakers for events or those performing odd jobs for cash payment, and these individuals are not entrepreneurs or in your (fictitious) employment, you must report these payments to the Dutch Tax and Customs Administration. This reporting is crucial for maintaining transparency and compliance with the tax laws.
In conclusion, payrolling in the Netherlands involves numerous steps and aspects, from registering as an employer to managing payroll taxes and maintaining comprehensive records. By following this guide and leveraging platforms like House of Companies, you can streamline the process and ensure efficient, compliant payroll management for your venture in the Netherlands.
Whether you're a seasoned entrepreneur or just starting, remember that understanding and effectively managing your payroll is crucial for your business's success. With the right knowledge and tools, you can make payrolling an efficient, hassle-free process, leaving you more time and energy to focus on growing your business in the Netherlands.
