NETHERLANDS LAW AND PRACTICE Contributed by: Friederike Henke, Ingrid Cools, Philip ter Burg, IJsbrand Uljée, Suzan van de Kam and Epke Spijkerman, BUREN
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers Taxes Paid by Employees Personal income tax Personal income tax personal income tax is levied on Dutch tax residents (on income from various worldwide sources) and non-Dutch tax residents (on income from Dutch sources). Personal income tax is levied on three different categories of income, referred to as “boxes”: • box 1 concerns income from work and home, and includes income from past and current employment, sole proprietorship, and an owner occupied home; • box 2 concerns taxable income from, in short, (share) interests of 5% or more in companies; and • box 3 concerns income from savings and investments. Wage tax is withheld by employers, and func - tions as a pre-tax to personal income tax (and employee social security contributions). Income from past and current employment (realised by Dutch and non-Dutch tax residents) is deter - mined by the Dutch Wage Tax Act 1964. Except in certain specific cases (for instance, if the indi - vidual functions as a board member or super - visory board member of a Dutch company), individuals who work (almost) entirely outside the Netherlands are generally not considered “employees” for Dutch wage tax purposes. Personal income tax for box 1 is levied at pro - gressive rates on income, minus personal deductions and allowances.
In 2025, the applicable rates for non-retired per - sons are: • 35.82% for income up to and including EUR38,441 (8.17% excluding social security contributions levied from employees); • 37.48% for income ranging between EUR38,441 and EUR76,817; and • 49.50% for income exceeding EUR76,817. Box 2 is levied at a progressive rate on income. In 2025, the applicable rates are: • 24.50% for income up to and including EUR67,804; and • 31.00 % for income exceeding EUR67,804. In 2025 box 3 income tax is levied at a rate of 36% on three categories based on a deemed return on assets minus liabilities. The deemed return for 2025 will be announced in the start of the year 2025, except for the “other assets” which is already known (deemed return: 5.88%). The effective rates applied in the preliminary 2025 personal income tax assessments are: • bank balances (including savings) and cash: 0.5184% (flat rate of return of 1.44 * 36%); • other assets: 2.1168% (flat rate of return of 5.88 * 36%); and • debt: -/- 0.9432% (flat rate of return of -/- 2.62 * 36%). In 2025, the first EUR57,684 (EUR115,368 for taxpayers with a tax partner) of net box 3 assets are tax-exempt. Subject to certain conditions, employees hired outside the Netherlands can apply for a ruling allowing employers to pay 30% of the wage tax- free, including allowances. This scheme may be
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