There is significant legislation giving rights and protection to employees in The Netherlands. Aside from legislation, many employers have to follow collective labour agreements (CAOs), which grant employees additional rights. Employees are entitled to a written statement of the terms of their employment and it is compulsory for an employer to provide this within one month of commencing work. An employer must enquire as to any non-compete restrictions in relation to the previous employment before the employee is recruited.
There are also a number of factors to consider when sending an expatriate over to the Netherlands. We’ve highlighted some of the key considerations below.
An individual who is resident in the Netherlands will be liable to income tax on personal income. Residency is determined by actual circumstances. The main criterion for determining residency is a “durable bond” with the Netherlands. An individual can have a “durable bond”, even if the time spent in the Netherlands is short.
Circumstances for determining residency include:
- where the individual lives;
- where their family lives; and
- memberships of clubs (such as sporting clubs) and where they socialise.
The place where an individual receives their mail and the location of the bank account they use for day-to-day expenses are of secondary importance.
The place of residency determines whether or not an individual is fully taxable for the income tax (resident tax payer) or just for certain items (non-resident tax payer).
The 30% rule:
In the Netherlands, there are special conditions for foreign employees working for a Dutch employer for a maximum of 120 months. They can obtain a 30% cost deduction from their taxable income, providing they perform activities in the Netherlands and they possess ‘special knowledge or capability’ which is rarely available or not available at all in the Netherlands.
Work & Residence Permits
Work permits and residence permits are not required for foreign nationals temporarily making business trips to the Netherlands, nor for citizens of countries in the European Commission (EC); however permits are necessary for non-EC citizens.
An employer will usually need to demonstrate that there is no Dutch resident who could satisfactorily do the job and the salary to be paid is not below prevailing Dutch rates. Different rules apply to owners of businesses. A business person who wishes to live in the Netherlands and establish a local business will require a residence permit. To be granted one, they will need to demonstrate that they will be bringing sufficient funds into the country to establish the business and that the business can realistically be expected to support them and their dependants.
Many employers in the Netherlands supplement salaries with their own range of benefits, which commonly apply to international employees too, including:
- pension plans;
- life and accident insurance for sales executives;
- enhanced sick pay;
- stock options (increasingly common); and
- commuting allowance, which can be tax-efficient for those using public transport.
The above should be incorporated into the initial planning phase of expansion into the Netherlands. Contact us to discuss your plans or to find out more about doing business internationally.