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Change to Dutch payroll taxes for non-residents as per 1 January 2019
As from 1 January 2019, more wage tax tables will be applied in the Netherlands. This is due to the differences in income tax credits for residents and non-residents. Income tax credit, consisting of the general tax credit and the labour rebate, is a discount on income tax levied, and therefore reduces wage tax. The credits include a premium component for social security and a tax-related portion.
(A) Liability for taxation is associated with residence. A resident of the Netherlands is liable for paying Dutch taxes. He/she is entitled to the tax-related portion of income tax credit. A non-resident is liable for paying taxes abroad, and in principle is not entitled to the tax-related portion of income tax credit.
This implies that :
- From 1 January 2019, only Dutch residents (i.e. domestic tax payers) are entitled the tax-related portion of the income tax credit.
- Non-residents are entitled only to the premium component if they have social insurance in the Netherlands.
- One exception applies to the tax-related portion of one of the income tax credit types, the labour rebate: any employees that are a resident of another member state of the EU, an EER country (Iceland, Norway and Liechtenstein), Switzerland or the BES countries (Bonaire, Sint Eustatius and Saba), are entitled to the tax-related portion of the labour rebate. They are not entitled to the tax-related portion of the general tax credit.
(B) an exception to the above applies to Belgian residents. The tax treaty between the Netherlands and Belgium sets out a non-discrimination provision. This implies that a Belgian resident is also entitled to the tax-related portion of the general tax credit, even if he/she is considered a foreign tax payer.
The payroll tax declaration that we prepare for you on a monthly basis or for each 4-week period, it is important to state the correct residential address of your employees. We do this for you by stating the residential address on the pay slip.
What is your employee’s residence?
(A) an employee with his/her permanent residential or actual address is a Dutch resident. This means he/she is entitled to the income tax credit.
(B) An employee living or residing in both the Netherlands and abroad is a Dutch resident only of his/her social and economic life is mainly in the Netherlands. For example if the employee’s family lives abroad, the children go to school broad and he/she has bank accounts abroad, he/she is not a Dutch resident. This person is not entitled to the tax-related portion of income tax credit. Please note, residents of member states other than the EU, EER or BES islands are entitled to the tax-related portion of the labour rebate.
(C) For an employee without a family, the intention is the key factor. If he/she wants to settle here, he/she is considered a Dutch resident. If this person aims to stay for just a short time, he/she is not considered a Dutch resident. If you have any reason for doubt, please ask the employee to complete a residence statement. This gives you certainty about your employee’s country of residence. The employee may request the residence statement from the tax office in the relevant district of the employee’s address. As per 2019, such applications are issued centrally via the Tax Authorities, Arnhem office, PO Box 9001, 6800 DB Arnhem.
(D) Regarding employees residing in Belgium, please note that the Belgian Income Tax Code (WIB 92) sets out a provision stating that the tax residence for married persons (or persons with a notarised cohabitation contract) is determined by the place of residence of the family, and this determination is irrefutable. For example if a man rents an apartment in Eindhoven for work reasons and stays there most of the week, while his spouse remains in Belgium, this person will still be regarded as a Belgian resident. This implies that he must file his full worldwide income to the Belgian taxes.
Examples
(A) A Belgian person lives in The Hague with his family and works in Rotterdam. This employee lives in The Hague and this address must be used in the payroll administration.
(B) A German person lives in Aachen (Germany) with his family and works in Eindhoven. He rents an apartment in Eindhoven and stays there on week days. This employee lives in Aachen and his German address must be used in the payroll administration.
(C) A Dutch person lives in Amsterdam and buys a new home in Breda. Nothing changes for this employee, not even if he lives in a temporary home in the Netherlands if the new home is delivered late.
If you have outsourced your payroll administration to Interfisc, we will need your input relating to the place of residence of your employees by 10 January 2019:
(A) If you are certain that your employee’s address on the pay slips is correct, no action is required.
(B) If you know an employee lives outside the Netherlands, but you list and address of a temporary home in the Netherlands on his/her pay slip, we need to know the correct residential address before the January 2019 payroll run (deadline is 10 January 2019). We will then review which wage tax table applies to the relevant employee. If you do not have your employee’s correct foreign residential address, you, the employer, are subject to mandatory application of the anonymous rate (52%).
What happens with the tax credit in 2019 if Interfisc provides the payrolling for you:
(A) If your employee’s residential address is in the Netherlands, the tax credits (both the general tax credit and the labour rebate) will continue to apply.
(B) If your employee’s residential address is in Belgium, the tax credits (both the general tax credit and the labour rebate) will continue to apply. If the employee is a tax payer only, then only the tax-related portion applies. If the employee also has social insurance in the Netherlands, the premium-related portion also applies.
(C) If your employee’s residential address is in a different EU or EER country or Switzerland, we will apply the tax credits differently in our payrolling software in 2019. Only the tax-related portion of the labour rebate will be applied.
(D) If the residential address of your employee is in a country other than in 1 to 3, we will not apply the tax-related portion of the tax credits.
Income tax statement for non-residents
In order to fully execute the applicable income tax credits for non-residents, we recommend you to submit a income tax return. If you want Interfisc to submit it for you, please contact our tax department via e-mail: consult@interfisc.eu or use our contactform for more information and a price quotation.
If your employee is making use of a preliminary tax refund for the 2019 income tax, your employee should take the above into account. If we apply both tax credits in the payroll administration, the foreign employees should not also apply a preliminary tax refund. If the employee still applies a preliminary tax refund, this person will exceed the rebate on the wage tax and will be required to repay the excess received to the Tax Authorities at the end of the year in the final income tax return.
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Since 1972, Interfisc has offered international HR & Payroll solutions in the Netherlands, Belgium, Germany, France, the United Kingdom, and Italy. We do this from our offices in the Netherlands and Belgium, and with an international team of around 45 committed and caring employees.
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