Hiring employees from outside the Netherlands: the fiscal and legal aspects

The increase of international operating staff on the labour market has been an obvious development for years. In the Netherlands the demand for highly qualified employees from abroad increases and at the same time posting staff to foreign company branches is growing. Employers recognize that this group of important employees needs extra support for their international adventure. In this article we will give a list of things that an employer will have to take into account when he is thinking of hiring an employee from abroad.

Relocation / Formalities
There is a huge difference in hiring an employee with an EU-nationality and an employee who comes from a non-EU country. An EU-national, excluding employees from Bulgaria and Romania and including employees from Switzerland, does not need to have a permit to live or work in the Netherlands. They only have to register with the IND when they intend to stay in the Netherlands for more than three months. For non-EU nationals the formalities to stay in the Netherlands for more than three months are much more complicated.

Non-EU nationals need to have a so called attorney for temporary stay (hereafter: entry visa) to enter the Netherlands for a period of more than three months. The request for this entry visa must be done with the Dutch embassy in the home country (or the country where the employee stays at the moment he needs to apply for the entry visa). Before the employee applies for this, the employer can ask the IND to give them advise about how the IND will respond to the apply for the entry visa.

When the incoming employee has arrived in the Netherlands, with or without entry visa, he must apply for a residence permit / work permit. The most effective way to get a residence permit is by means of the ‘kennismigrantenregeling’. This is a special procedure for highly skilled employees. Please note that the employee needs to have a minimum (2011) income of € 50.619 (or € 37.121 if the employee is younger than 30 years old) to be able to apply for this procedure. As an employer you have to register at the IND in order to achieve that your employee can apply for a residence permit through the ‘kennismigrantenregeling’.

If the employee does not meet the salary criteria or the employer does not register at the IND, the employee can apply for a residence permit / work permit as a labour migrant.

30%-ruling
The 30%-ruling has been introduced in the fiscal law for incoming employees with specific expertise that is hardly available on the Dutch labour market. With the approval from the tax authorities, the employer can pay 30% of the fiscal wage tax free to the employee.

Recently the Dutch Ministry of Finance proposed several changes of the 30%-ruling. Most important change is the introduction of a salary criteria and employees living in the border area (radius of 150 km from Dutch borders) will no longer qualify for 30% tax ruling. If these changes will be implemented in the fiscal law it will have a big impact on the Netherlands as a business location for foreign employers and employees.

BOM Foreign Investments is cooperation with our network of companies, intermediaries and government to plea for a change in 30% tax ruling proposal from Ministry of Finance.

Social security
When you hire a foreign employee who will be living and working in the Netherlands he will most likely be social secured in the Netherlands. This means that you will have to pay social security premiums on his behalf.

This can be different when the employee is in the possession of an A1 declaration (before it was the E-101 declaration) or a Certificate of Coverage. Please note that this is only applicable in case the employee is seconded from abroad by a related entity. In this case the employee will stay social secured in his home country.

Payroll
Not only Dutch companies need to set up a Dutch payroll for employees who work in the Netherlands and are taxable in the Netherlands. Also foreign companies who do not have a Dutch subsidiary and who second their employee to the Netherlands, can be faced with this issue. Especially for the employee it is beneficial when the employer pays wage tax so that he does not have to pay all the taxes in a lump sum at the end of the year.

Medical insurance
As soon as the foreign employee is living in the Netherlands and he does not have an A1-declaration, he must have a medical insurance. Basic medical insurance premiums start at approximately € 90 per month. Please note that in case an employee does not have a medical insurance a fine can be imposed.

Tax return
Once the employee works and lives in the Netherlands, he needs to pay taxes on his worldwide income. The employer withholds wage tax and social security premiums from the wage of the employee. This wage tax will be balanced with the income tax that is due over the worldwide income. Especially in the first year that the employee earns income in the Netherlands, in most cases it is beneficial to file a tax return. This because of the fact that the employer withholds too many taxes and premiums and does not calculate the correct amount for the general tax credit and the labour credit in the salary payments.

Tax Globalizers Bluestone
Beemdstraat 5
5653 MA Eindhoven
+31 (0)40 800 1940
www.tgbstone.com