IT Contracting in The Netherlands: Money & Tax
Profile written by Matt Walters of Capital GES (updated September 2016).
The Netherlands is currently one of the most popular and advantageous countries for European contractors in both the IT and other sectors. With generous allowances for skilled workers, it is a financially viable destination, while its proximity to the UK makes it easy to return home.
All citizens must register with their local town hall office upon entry into the Netherlands if they plan on staying in the country for more than, on average, 4 months (this period can change from city to city).
Citizens of the EU/EEA who wish to stay in the Netherlands for more than 3 months must also register with the Immigration and Naturalization Department (IND). The department will stamp your passport as proof that you have registered and the stamp is then valid throughout the duration of your passport.
With these registrations done, there is a choice to be made based on your contract duration and intentions: between a SoFi number and a BSN number. These numbers fulfil the same function (in many ways they can be considered equivalent to a UK National Insurance number), but differ in the implications that they entail.
i. SoFi number
The SoFi number covers contractors who come to the Netherlands, but do not stay long enough to register with their local town hall. You can obtain a SoFi number directly from the nearest tax office (belastingkantoor) by showing your passport and by giving a home country address.
ii. BSN number
The BSN number is required of every Danish citizen and anyone working in the Netherlands who stays long enough to register with their local town hall. You will automatically obtain a BSN number upon registration.
N.B.: Once registered with your town hall, you will remain taxable in the Netherlands until you deregister, so don’t forget to do so when you leave!
iii. What if I change my mind?
No problem: you may go to your town hall with your previously-obtained SoFi number at any time, and they will register you for a BSN number.
II. Taxation in the Netherlands
The Dutch tax year is the calendar year, and tax returns must be filed by April 1st of the following year. Tax rates are banded between 33% and 52% dependant on income, but this is tempered by the 30% ruling.
Dutch tax allowances:
i. The 30% ruling
The 30 % ruling is an allowance made by the Dutch tax authorities for skilled workers coming to work in the Netherlands which allows you to take 30% of your gross salary tax free. This is intended to cover your living costs (including accommodation) while in the Netherlands.
In order to obtain the 30% ruling, you must have the relevant experience in your field. A higher education qualification or professional certificates will also help your eligibility.
The application for the 30% ruling should be made by your employer within four months after the start of employment.
The 30% ruling must be reapplied for with each new employer, and, excluding periods of employment outside of the Netherlands, will last a maximum of 8 years.
ii. Mortgage tax relief
Any Dutch tax resident may apply for mortgage tax relief on their principal residence, be it within the Netherlands or abroad. It is worth considering, however, that as a tax resident you will also be liable for tax on your fortune and worldwide income.
iii. Tax rebate
All taxpayers may claim a general rebate and supplementary rebates depending on family status and age.
IV. Social Security
Social security must be paid on your salary in the Netherlands unless your EU-based employer can detach you from another EU country by means of an E101 certificate.
Care must taken here, and it is worth taking advice, as detachment by means of an E101 may not be the best solution in all cases due to either a) the duration of your intended stay in the country, b) the level of cover provided, or c) the cost of said contributions. It is also worth noting that, under the EU social charter, social security contributions made within an EU country will count towards your time stamp for the UK.
V. Work permits
Citizens of EU countries do not need a work permit to take up employment in the Netherlands. This also goes for citizens of Switzerland, Liechtenstein, Iceland and Norway. Citizens of these countries need only register with their town hall and the IND upon arrival.
Citizens of all other countries must go through a full registration and work permit process. A work permit can only be obtained if no suitable candidate can be found in the Netherlands or another Member State of the EU.
As of January 2009, the Netherlands have introduced a new admission scheme for highly educated persons. Under certain conditions, individuals with at least a Master’s degree can obtain a residence permit for a maximum of 1 year in order to find a job as a highly skilled migrant or to start an innovative new company.
Capital GES is an international payroll and contract-management company providing tailor-made tax planning services to contractors working overseas. For more detailed information on your personal situation, please contact Capital on +41 32 732 97 00.