The wage withholding tax has to be calculated on all remunerations an employee receives on the basis of his employment for his work. Tax is also payable on various benefits, e.g. old age pension and other benefits.

The principal forms of wages are ‘wages in cash’: salary, holiday allowance, overtime payment, commissions, annual bonus, and anything else an employer pays in cash to an employee which is deemed to be remuneration for his work. But there are other forms of wages as well, such as remuneration ‘in kind’, claims and (free) reimbursements and facilities.
Remuneration in kind is income that is not paid in money, but in some other way, for instance a holiday or a camera.

A claim is an entitlement to receive a benefit or facilities after a set period of time, or subject to conditions. An example of this is entitlement to pension.
Examples of facilities are tools, meals or tickets for public transport.
Free reimbursements are amounts an employer pays an employee to cover costs the employee incurs in order to be able to perform his work properly. Amounts the employer pays the employee which, according to the generally held view, are not seen as remuneration for services provided or to be provided, are also included in this category. Reimbursements and facilities are treated in the same way as far as this is possible.

If allowances in kind may be issued tax-free, they may usually be reimbursed tax-free as well. Examples include professional literature or work clothing. A free reimbursement or facility of this kind is not deemed to be part of the income. Some free reimbursements or facilities are exempt from tax up to a given limit, e.g. those for travel expenses. Other reimbursements and facilities are sometimes subject to tax for a fixed sum which will be part of the employee’s wages. The part of the reimbursement or facility that is not tax-free is subject to tax.

Rates

Tax on the taxable income from work (box 1, see paragraph 3.3) is:

• The first bracket: 34.15% on the first € 17,046.
This rate comprises 2.45% tax and 31.70% social security contributions.

• The second bracket: 41.45% on the next € 13,585.
This rate comprises 9.75% tax and 31.70% social security contributions.

• The third bracket: 42% on the next € 21,597.
This rate consists solely of tax.

• The fourth bracket: 52% on the excess.
This rate also consists solely of tax.

Taxpayers aged 65 or older are subject to a rate of 16.25% in the first bracket and 23.55% in the second bracket because persons over the age of 65 are no longer required to pay old age pension (aow) contributions.

Levy rebates

When deducting wage withholding tax, the employer takes levy rebates into account. Among other things, these consist of a general rebate and employment rebate. These are general credits that apply to all employees. The general rebate comprises a tax element and a social security contribution element. Entitlement to the contribution element of the general rebate applies only if the employee has compulsory Dutch social security coverage. The employer may not take into account any allowances and deductions that are linked to the employee’s personal circumstances. To avail himself of personal deductions, an employee must file an income tax return. For some employees wage withholding tax is the final tax because they are not eligible for personal deductions and have no further income.


Reduction in tax and contributions for various groups of employees

Employers may avail themselves of a reduction in tax and contributions for various groups of employees. In such a case they may remit a lesser amount in wage tax and social security contributions.

The principal goals of lower remittances are to stimulate education and research.