Payroll tax

Everyone working in the Netherlands is required to surrender a portion of their salary to the government in the form of payroll tax.  

Payroll tax is the collective term for the taxes and premiums deducted from the gross salary. After deducting these and other levies, the net salary remains . This amount is ultimately paid out to the employee.  

Payroll tax consist of the following levies:

• Wage tax
  A general source of income for the government to pay for things like education, healthcare costs, and new roads
• Premium for national insurances
  Reserved for social provisions for everyone in the Netherlands, such as old age pension (AOW) and child benefit.
• Income-dependent contribution for the Health Insurance Act
  

National insurance contributions 

National insurances are legally mandatory social insurances that insure residents and employees in the Netherlands against the financial consequences of old age, death, special medical expenses, or children. National insurances consist of:

• General Old Age Act (AOW)
  
• General Surviving Relatives Act (Anw)
  
• Long-term Care Act (Wlz)
  
• General Child Benefit Act (AKW)
  

You withhold national insurance contributions from the wage and pay them to the Dutch Tax Office as part of the payroll tax obligations. You do not pay a premium for the AKW.

Employee insurance contributions

Employee insurances are legally mandatory social insurances that insure employees against the financial consequences of illness, disability, and unemployment. Employee insurances are:

• Sickness Benefits Act (ZW)
  
• Occupational Disability Insurance Act (WAO) / Work and Income according to Labour Capacity Act (WIA)
  
• Unemployment Insurance Act (WW)
  

As an employer, you fully bear the premiums, which are inlcuded in the payroll tax calculations. 

Income-dependent contribution Health Insurance Act

The Health Insurance Act (Zvw) regulates mandatory health insurance. Under this law, an employee must pay a nominal premium to a health insurer for their health insurance. Additionally, you pay an employer levy for your employee's health insurance. In some cases, your employee pays a contribution for the Health Insurance Act. The overarching term for the contribution for the Health Insurance Act and the employer levy for the Health Insurance Act is 'income-dependent contribution for the Health Insurance Act,' which is also a component of payroll tax. For employers in the Netherlands, it is crucial to understand that payroll tax encompasses not just wage tax but also national insurance contributions, employee insurance contributions, and health insurance contributions. Payroll tax must be deducted from employees’ wages and paid to the Dutch tax office regularly. Proper payroll tax administration ensures compliance with Dutch regulations and avoids penalties for both employers and employees.