Exemption from filing an income tax return for your employees

Under certain conditions, you may adjust the payroll tax and/or national insurance contributions that you have to withhold to match the income tax and possible national insurance contributions that your employee has to pay. You then make a single annual calculation. If you have agreed a net wage with your employee, you can use this method to quickly calculate the correct amount. Your employee does not have to file a Dutch income tax return.

This simplified procedure applies to:

• employees who live abroad and work in the Netherlands, and who only have income from wages in the Netherlands
• employees who are recruited from another country or sent from another country to work in the Netherlands, who live in the Netherlands and may still choose partial non-resident taxpayer status
  From 1 January 2025, some employees can no longer choose partial non-resident taxpayer status. Read more below.

Who can still choose partial non-resident taxpayer status as of 1 January 2025?

From 2025, fewer employees can choose partial non-resident taxpayer status. Only employees who use the Expat Scheme (30% facility) and fall under transitional law may still choose partial non-resident taxpayer status up to and including 31 December 2026.

This transitional law applies under the following conditions:

• You applied the Expat Scheme for your employee for the last wage period of 2023.
• After an interruption after 31 December 2023, your employee did not again become an inbound employee.
  There is no interruption for this transitional law if your employee finds a new employer within 3 months and both wish to apply the Expat Scheme for the remaining term.

Conditions for the single annual calculation

You may only use this method if you have agreed working arrangements with us and we have given you written approval to do so. To receive approval, you must discuss this with your Tax Office.

You must at least meet the following conditions:

• Your employee only earns income from employment from you and has no other Dutch sourced income.
• You are able and willing to carry out a full wage calculation and you have the necessary expertise (internal or external) available for this.
• You have a software package or other system with which you do the Dutch payroll taxes on time and in full (with all wage-related elements).
• You are responsible for the complete and correct processing of the payroll taxes and you can be held accountable for this.
• Your employee declares in writing to agree with this working method and you keep this declaration with the payroll records.

For approval, you consult with your tax office. Upon approval, a (wage tax) agreement is concluded between you and the Netherlands Tax Administration.

Performing the single annual calculation

Do you have approval to carry out the single annual calculation? Then you estimate during the year the wage data you need per period for the annual calculation. Do this to the best of your abilities. Data that is not yet known in the wage period is included in the annual calculation.

In December or immediately after the end of the year, you make a single annual calculation. If your employee leaves your employment during the year, you do so immediately after the end of the employment. You can only do this if you are sure that your employee will have no income (from employment) in the Netherlands for the rest of the year. You set the wage tax/premium national insurance contributions at the correct amount. You take your employee's country of residence into account when calculating the tax credits. You do not take into account the qualifying non-resident taxpayer for income tax purposes. You include the wage tax/national insurance contributions calculated in this way in the last tax return of the calendar year.

You must correct this tax return if later it turns out to contain errors, for example due to incorrect data. Or if you make payments later, for example a bonus that you grant a year after your employee has left.

Calculating tax credits

Employees are only entitled to the premium portion of the tax credits for the period that they are insured in the Netherlands (covered by the Dutch social security system).

Employees are entitled to the tax part of the tax credits if they live in the Netherlands for the whole year. If your employee lives abroad the whole year, you do not take into account the tax part of the tax credits when withholding the income tax.

There are exceptions to this:

• Your employee is entitled to the tax part of the employed person's tax credit for the period that he lives in a country belonging to a certain circle of countries. These countries are listed in section 9.3.7 of the Handboek Loonheffingen (Payroll Taxes Manual, only available in Dutch).
• If your employee lives in Belgium, Suriname or Aruba, he is also entitled to the tax part of the general tax credit.

Do you take into account the employed person's tax credit or the general tax credit for your employee? Then you must take account of the total wage, and not just wage taxed in the Netherlands. This total wage also serves as the fiscal wage.