Exemption from filing an income tax return for your foreign 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:
- an employee who lives abroad and works in the Netherlands, and who only has income from wages in the Netherlands
- an employee recruited from another country or sent from another country to work in the Netherlands
If this employee lives in the Netherlands and if he makes use of the 30% facility, he can choose for the so-called partial non-resident tax liability. In that case, the employee is treated as a non-resident tax payer for the purposes of income tax in boxes 2 and 3. Often, the taxation in the Netherlands can therefore be limited to the earned income.
Conditions for the single annual calculation
You may only apply this method if you have filed a request with the Netherlands Tax and Customs Administration and we have given you our approval. To receive our approval, you must at least meet the following conditions:
- The 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.
- The 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 and Customs 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 the 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 the 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 the 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 the employee has left.
Calculating tax credits
Your employee is only entitled to the premium portion of the tax credits for the period that he is insured in the Netherlands (covered by the Dutch social security system).
Your employee is entitled to the tax part of the tax credits if he lives 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. Which countries these are is stated in section 9.3.7 of the 'Handboek Loonheffingen' (only available in Dutch). You can find the 'Handboek Loonheffingen' at belastingdienst.nl/loonheffingen.
- 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 his total wage, and not just wage taxed in the Netherlands. This total wage also serves as the fiscal wage.