Netherlands Approves 2017 Budget with Payroll Changes

By Jared Mondschein

Middle-income earners will face increased income tax rates beginning Jan. 1, 2017, according to the 2017 budget passed by the Dutch parliament, the Ministry of Finance said Dec. 21.

Under the employment income tax changes for individuals under retirement age:

• The first income tax bracket’s threshold will increase to 19,982 euros ($20,896) from 19,922 euros ($20,833) while the rate will increase to 8.9 percent from 8.4 percent.

• The second income tax bracket’s threshold will increase to 33,791 euros ($35,337) from 33,715 euros ($35,258) while the rate will increase to 13.15 percent from 12.25 percent.

• The third income tax bracket’s threshold will increase to 67,072 euros ($70,142) from 66,421 euros ($69,461) while the rate will increase to 40.8 percent from 40.4 percent.

•The fourth income tax bracket, a 52 percent tax rate on all income greater than the third income tax bracket, is to remain unchanged.

Social taxes: Social tax rates will also change according to a 2017 payroll guide released by the government Dec. 19. Beginning Jan. 1, 2017, the national insurance contribution rate for employees will decrease to 27.65 percent from 28.15 percent on all incomes up to the wage base ceiling of 33,791 euros.

In addition, employer contributions for employee medical benefits are to decrease to 6.65 percent of employee wages from 6.75 percent while employer contributions for unemployment insurance are to increase to 2.64 percent of employee wages from 2.44 percent.

Company Cars: The payroll guide clarified that only two classes of tax for private usage of company cars are to exist beginning Jan. 1, 2017: zero emission cars are to be taxed at 4 percent while non-zero emission cars will be taxed at 22 percent.

CO2 tax rates are currently 4 percent for zero emission cars, 15 percent for cars with a CO2 emission of up to 50 gr/km, 21 percent for cars with a maximum emission of up to 106 gr/km and 25 percent for cars with an emission exceeding 106 gr/km.

Salary Requests to End: Dutch tax authorities will no longer ask employers for information on the annual salary of employees in 2017, the payroll guide said. Numerous improvements to the payroll tax return process have allowed for the Netherlands to no longer need this option to obtain salary data on employees when the payroll records were either incomplete or incorrect, the government previously said.

The approved budget also includes modifications to tax benefits for start up companies and organizations engaging in research and development activities as well as clarification on transfer pricing issues.

To contact the reporter on this story: Jared Mondschein at jmondschein@bna.com

To contact the editor on this story: Michael Baer at mbaer@bna.com

For More Information

The 2017 income tax rates in the Netherlands are available in Dutch at https://www.rijksoverheid.nl/ministeries/ministerie-van-financien/nieuws/2016/12/21/belangrijkste-wijzigingen-belastingen-2017

The government payroll guide to 2017 changes in payroll is available in Dutch at http://download.belastingdienst.nl/belastingdienst/docs/nieuwsbrief_loonheffingen_2017_lh2091t72fd.pdf

More information on payroll issues in the Netherlands is available in the Netherlands country primer.

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