Taxes and social security

Every person working in the Netherlands is obliged to pay wage tax. Wage tax is a tax the employer deducts from the employee’s salary and transfers to the Dutch Tax Administration and Customs (Belastingdienst, hereafter Tax Office). Income tax includes wage tax and social premiums. As the employer, the university also withholds pension premiums, which are transferred to the pension fund.

This information applies to persons who are employed with Utrecht University, as well as those who conduct teaching or research activities at the university based on a hospitality agreement.

Wage tax and pension premiums

The university is obliged to deduct wage tax and pension premiums from the salary of all persons employed with Utrecht University. The Tax Office decides whether the 30% scheme or a tax deduction applies to your situation. The provisions mentioned below, with exception of the provision for income tax, do not apply to persons conducting teaching or research activities based on a hospitality agreement.

Taxes and premiums

Wage tax

Dutch employers, such as Utrecht University, are required to deduct tax from the employee’s salary. This is in order to prevent the employee from having to pay a substantial amount of wage tax at the end of the year. The employer transfers the withheld amounts to the Tax Office.  

  • Foreign employees who are obliged to pay wage tax in the Netherlands can, upon meeting certain specific conditions, be considered for a partial tax exemption. Read about the 30% scheme below. 
  • In case of exceptional circumstances, a foreign employee employed with Utrecht University can be fully exempted from paying wage tax in the Netherlands. The Tax Office will have to issue a tax exemption statement to this effect.

Paying less wage tax: the 30% scheme

Under specific circumstances, as a foreign employee, you are entitled to a 30% reduction in wage tax. This is directly settled through the salary. In order to be eligible for this scheme, you will have to meet a number of conditions, e.g. a minimum salary and the so-called ‘kilometre condition’. The minimum salary requirement does not apply to scientific staff. The kilometre condition implies that the employee must have lived more than 150 kilometres away from the Dutch borders during at least 16 of the 24 months preceding the first day of employment. 
When you wish to apply for the 30% scheme, you will have to submit a statement to the Tax Office, which will subsequently check whether you meet the requirements. 

Tax deduction

Employees in the Netherlands may be eligible for tax deductions. These deductions are based on your personal circumstances, such as the level of your income. Most tax deductions are settled directly through the salary. Only a few tax deductions must be individually cleared with the Tax Office. The Tax Office can inform you whether such a tax deduction applies to your situation.

Pension premiums

Utrecht University also deducts pension premiums from your salary. These premiums are transferred to the ABP Pension Fund that the university, based on the Collective Labour Agreement for the Dutch Universities (CAO NU), participates in. The pension fund manages the accrual of your pension rights. Read more information about the ABP Pension Fund on the ABP website.

Income tax

Everyone living in the Netherlands must submit an annual income tax return. Tax is imposed on your income. You usually pay this amount on a monthly basis via your university salary. If you don’t receive a salary from the university, but, for instance, a grant from your home country, you are still subject to taxation. If you don’t submit a tax return, the Tax Office will make an estimation of the height of your income: you will then receive a tax assessment as well as a default penalty. If you need assistance in submitting your tax return, please contact the ISD.

Social security and social insurance

The Dutch social security system

The Dutch social security system consists of (a) social insurances and (b) social security benefits. Premiums are paid towards the social insurances, while the social security benefits are paid from the government’s general resources. People are only entitled to social security benefits if they are unable to provide for themselves. As these do not entail obligatory insurances and only apply to exceptional situations, these will not be discussed here.

Social insurances and supplementary allowances

Everyone living and working in the Netherlands – either from within or outside of the EU – is obliged to be covered by social insurance. You have to pay premiums towards these insurances, which are deducted from your salary. The employer transfers the premiums to the Tax Office.

In very exceptional circumstances, for instance when a person works in the Netherlands but also partly lives abroad, the social security system of the ‘home country’ may apply. In that case, no contributions will have to be paid in the Netherlands. The very strict legislation applies to this situation and a tax exemption statement from the Tax Office is required. For this reason, the ISD will ask every international employee to complete a short questionnaire prior to the start of their employment with Utrecht University.

Social insurances and supplementary allowances

The Dutch social insurances consist of employee insurances and national insurances.

  1. Employee insurances: these insurances cover income risks in case of unemployment or (chronic) illness. The Netherlands has three employee insurances: the Sickness Benefits Act (in Dutch ZW), the Unemployment Insurance Act (in Dutch WW) and the Work and Income According to Labour Capacity Act (in Dutch WIA).
  2. National insurances: these insurances provide a financial safety net to cover income risks of a general nature, with respect to old-age pension, surviving dependants, intensive care and children. The Netherlands has four national insurances: the General Old Age Pensions Act (in Dutch AOW), the General Surviving Dependants Act (in Dutch Anw), the Child Allowances Act (in Dutch AKW, no contributions required) and the Chronic Care Act (in Dutch WLZ). The Health Care Insurance Act (in Dutch Zvw) is also considered an obligatory national insurance even though formally it isn’t.

No premiums are deducted from your salary for the employee insurances; these are paid by your employer. However, contributions are deducted from your salary for the national insurances, with the exception of the AKW. Salary deductions in the form of wage tax and national insurance are collectively called ‘income tax’.

If you are employed with Utrecht University, income tax will be imposed on your salary. This does not apply to persons who conduct teaching or research activities at the university based on a hospitality agreement.

Descriptions of work-related insurances

Unemployment Insurance Act (in Dutch WW)

A foreign employee who is covered by social insurance in the Netherlands and becomes unemployed may be entitled to an unemployment benefit. Entitlement to the benefit partially depends on the number of years the employee has contractually worked within the European Economic Area (EEA). In principle, the employee will have to live in the Netherlands. Under specific circumstances, an employee who has moved to, for instance, Germany, may temporarily keep the entitlement.

Work and Income According to the Labour Capacity Act (in Dutch WIA)

An employee who has been ill for nearly two years (104 weeks), and as a result now earns 65% or less of the original salary (i.e. the employee is considered occupationally disabled for at least 35%), is entitled to the WIA benefit. Prior to the decision on the WIA benefit, the sick employee who has been (partially or fully) unable to work will receive a (partial) salary from the employer for a period of two years. This obligation for the employer to continue to pay salary during illness is based on the Collective Labour Agreement for the Dutch Universities.

General Old Age Pensions Act (in Dutch AOW)

The AOW is the Dutch basic pension insurance. In principle, everyone living in the Netherlands – irrespective of their nationality – is insured under the AOW. Nonetheless, some employees who live in the Netherlands are not insured under the AOW. This may be the case if you live and work in the Netherlands but have remained insured in your home country. In this specific situation, you will possess a secondment statement or A1 statement that was issued in your home country.

The AOW is part of the obligatory national insurances. Each year you work in the Netherlands, you accrue 2% of AOW pension rights. Depending on whether the Netherlands has entered into an agreement with the country you will be living in at the time of your retirement (the AOW pensionable age), you will be entitled to the AOW pension until you decease. In addition to the general basic AOW entitlement, you also accrue pension with the ABP Pension Fund via Utrecht University. For further information about ABP, view www.abp.nl/en.

Health Care Insurance Act/Chronic Care Act

In the Netherlands, two statutory obligatory insurances apply to the field of medical health and care: the Health Care Insurance Act (in Dutch Zvw) and the Chronic Care Act (in Dutch WLZ).

Obligatory insurances

Everyone who lives in the Netherlands for a long-term period (generally understood to mean for a period longer than one year), is obliged to take out basic health care insurance with a Dutch health care insurer. This goes for persons conducting teaching or research activities based on a hospitality agreement as well. The obligation also extends to your partner and any children of 18 years old and above, who also live in the Netherlands. The insurance is not obliged for children under the age of 18. If you or one of your family members is uninsured, you risk being fined. 

  • The Health Care Insurance Act (in Dutch: Zvw) covers the costs of 'regular' medical care, such as the costs of a general practitioner, pharmacy costs and the costs of a stay in a hospital. You are obliged to take out basic insurance with a Dutch health care insurer to cover these standard costs. Supplementary health care insurance is recommended if you wish to be (partially) covered for the additional costs of e.g. physiotherapy, glasses or dental care.
  • The Chronic Care Act (in Dutch: WLZ) (in Dutch Zvw) covers the costs of special and, particularly, expensive care, such as long-term nursing or home care.
Supplementary allowances

Under certain circumstances, the government contributes towards the costs of living. Whether you are entitled to one or more of these supplementary allowances strongly depends on your personal situation and income. Every person is entitled to these supplementary allowances, granted they meet the statutory conditions.

There are five different supplementary allowances that are concisely explained below::

  • Rent allowance: allowance intended as a contribution towards the rental costs, which may be too high in view of income, family composition, type of housing and the tenant’s age.  
  • Child benefit: a contribution towards the costs of raising one or more children up to the age of 18. This allowance can be applied for with the Sociale Verzekeringsbank, the organisation that implements national insurance schemes in the Netherlands.
  • Supplementary child benefit: a supplementary allowance contributing towards the costs of children up to the age of 18. To be considered for this allowance, the joint income of both parents is not allowed to be too high. The Tax Office will inform parents who are entitled to this allowance.  
  • Child care benefit: a contribution for parents towards the costs of child care.
  • Healthcare allowance: a contribution towards the costs of your Dutch healthcare insurance. The specific amount depends on your income.

Both employees and persons conducting teaching or research activities based on a hospitality agreement may be entitled to the above-mentioned supplementary allowances if they meet the statutory conditions.

Municipal taxes

Everyone who lives in the Netherlands is obliged to pay municipal taxes. These taxes may be (partially) included in the rent. The municipal (local) taxes that are being imposed are:

Taxes and levies

Property tax (in Dutch OZB)

The owner of a property is obliged to pay the municipality an annual property tax. The property tax is based on the value of the property, according to the Real Estate Valuation Act (in Dutch WOZ). Each year, on January 1st, the municipal council decides on the property tax percentage for that year.

Sewerage levies

The owner of a property is obliged to pay tax towards the costs of the maintenance and upkeep of the sewerage. This includes the discharge of rainwater and the regulation of groundwater.

Waste collection levies

These are the costs charged to the user of a property for the collection and processing of household waste. The owner of the property may transfer the charges to the tenant. Waivers of the property tax, waste collection levies or sewerage levies are possible under specific circumstances, e.g. when there is insufficient income to pay the taxes.

Water board tax

You pay tax to the water board for the benefit of the purification of wastewater and the maintenance of dykes. The owner of the property may transfer the taxes to the tenant.