With a high standard of living, widely spoken English, and quick transport to the rest of the EU, the Netherlands is an attractive destination for international contractors. There are several unique taxes, payment, and social security hurdles for contractors, but given the benefits of working in the Netherlands, they are worth overcoming.
This guide will get you started on contracting in the Netherlands and which payment methods are best for you. You will also learn tax rates and residency, social security contributions, and work permit requirements.
Do I need a visa while contracting in the Netherlands?
Only non-EU contractors will need a work visa in the Netherlands, but all foreign workers who stay longer than 90 days have to register with local authorities. UK contractors should keep in mind the work permit requirement may apply to them following Brexit.
Work permits require a registered Dutch sponsor, such as an umbrella company or a Dutch limited company. Otherwise, your client would need to sponsor it, and that would require a new visa every time you change clients.
How do I get paid as a contractor in the Netherlands?
There are several ways to get paid while contracting in the Netherlands. The best choice will depend on how long or frequent your contracts are, and whether you are experienced with contracting internationally.
Work as a freelancer
You can work as a freelancer or independent self-employed in the Netherlands, but keep in mind that Dutch law is evolving around the employee vs contractor relationship. Any long-term, steady engagement could also be considered regular employment. For non-EU contractors, you would have to ask your client to sponsor a work permit, so this may not be the best option for you.
Set up your own limited company in the Netherlands
It is possible to set up your own limited company in the Netherlands, as long as you are prepared to learn all of the registration rules and prepare payroll and taxes for yourself with the help of local accountants. This payment method is best for contractors planning on remaining in the Netherlands long-term, or for repeat engagements with multiple clients.
Use an umbrella company in the Netherlands
If you use an umbrella company to work in the Netherlands, they will interface on your behalf with the client. There is a convenience to this as they oversee the payment process and can withhold tax and any contributions.
However, changes to the Dutch wage and payroll rules in 2020 may affect this option. The reason is that now agencies, which now include umbrella companies, must offer severance payment upon termination, and that applies from the very first day of work. The umbrella company may need to deduct from your net pay to offset this mandatory payment to you or reach an understanding with the end client to contribute.
Can I use my UK-based limited company in the Netherlands?
Currently, this is still possible as long as the UK remains in the EU, but may not be a viable option following Brexit, depending on the trade agreement. As a foreign company, you would need to register and set up a payment system for yourself under Dutch guidelines.
Taxes for contractors in the Netherlands
Tax rates in the Netherlands are progressive based on income level and range from 0 to as high as 49.5%.
How do I file taxes in the Netherlands?
Step 1: Register for a DigiD here.
Note: A DigiD may take a few weeks to arrange.
Step 2: The tax authority (Belastingdienst) will send you a digital invitation to file a tax return. If you do not get one, but you received income that hasn’t been taxed or you have deductions, you must still file a form online.
Step 3: Collect the necessary documentation. This may include:
- Year-end statement from employer
- Year-end statements from the bank including a mortgage statement)
Step 4: Download the electronic software program required to submit your tax return from the website, nl.
Step 5: File the relevant form (all forms are filed electronically except for the M form).
- P form: those who are in a regular employment situation and have resided in the Netherlands for the entire fiscal year.
- M form: those who have resided in the Netherlands for part of a year.
- C form: those not residing in the Netherlands, but earning Dutch income.
Step 6: Within 6-12 weeks of submitting your tax return, you will receive a preliminary assessment from the tax authorities detailing an estimated tax return. An M and C form may take longer.
Tax residency rules in the Netherlands
The Netherlands does not assign residency based on the number of days in the country each year. Instead, there is a fact-based test that relies on circumstances and ties to the Netherlands such as:
- First, where a permanent home is maintained (most important)
- Then, where employment duties are performed
- Also, where the individual’s family resides
- Where the individual is registered with the local authorities
- The individual’s centre of economic interests
- The intended length of stay
If you meet the criteria for residency, you are taxed on worldwide income and would have to look to a tax treaty to avoid double taxation in your home country.
What is the 30% tax ruling and how does it affect me?
The 30% rule applies to highly skilled foreign workers and allows an employer to offer 30% of the salary tax-free. So, it would affect contractors that work with umbrella companies and perhaps with a Dutch limited company.
What is a G-account and do I need one?
A G-account is a blocked bank account for tax payments and social contributions that can only be accessed by authorities. You would only need one if you have your own limited company for making payments.
Social security contributions for contractors in the Netherlands
Some types of social contributions are not mandatory for self-employed in the Netherlands, such as health and unemployment insurance, but they could apply with an umbrella company. National insurance is compulsory for anyone who works in the Netherlands but is already included as part of income tax for the lower two-thirds of income levels (rather than through a payroll tax). The top third income bracket pays a 27.65% additional contribution.
If a contractor is only working temporarily in the Netherlands, they can remain on their home country’s social security program, and not pay the national insurance.
National insurance includes:
- Child benefits
- Survivor benefits
- Old-age pension
- Long term care
How do umbrella companies help with contracting in the Netherlands?
Using an umbrella company does simplify the process of contracting in the Netherlands, as your payments and contributions are handled for you. You would receive your net pay each month after the client and umbrella company confirm your completed timesheets or project. This eliminates any misunderstanding or conflict and ensures a smooth work relationship with your client.
Benefits include:
- Firstly, handle all client payments, tax withholding, and any social contributions
- Secondly, issue you a payslip each month, to a Dutch or foreign account
- Then, sponsor work permits for non-EU citizens
- Help set up the Dutch contract with the client
- Also, moderate any disputes with your client
- Last but not least, advise on access to totalization and double taxation treaties
Unless you are ready to do all of this on your own, using an umbrella company in the Netherlands is a great way to get started. You can always change to a different work structure if you decide to stay long-term or want more independence.
Contractor Taxation has umbrella companies in the Netherlands that are ready to assist you, from securing work permits, setting up contracts, and arranging prompt payment. Please contact us with your questions about contracting in the Netherlands.
