Under Dutch tax law, every supplier of staff is the withholding agent of the wage tax, national insurance and employee insurance contributions owed in the Netherlands. This rule (also) applies to all foreign employers and foreign employment agencies that make staff available in the Dutch labour market. The withholding obligation in the Netherlands will arise regardless of the way in which an employee is supplied. As the supplier, you will have to withhold wage tax and national insurance contributions from the wages. In principle, these amounts are withheld from the wages as one amount, known as payroll tax.
If you pay wages to an employee, you will have to withhold wage tax and pay this tax to the tax authorities. Normally, the wage tax is an advance levy in respect of the income tax owed. This means that the wage tax already paid is usually offset against the amount of income tax owed by the employee.
Like wage tax, national insurance contributions are levied on the employee's wages. If you pay wages, you will have to withhold national insurance contributions from the employee's wages and pay these contributions to the tax authorities. The contributions are made to cover the following three insurance schemes:
Most of the national insurance schemes are administered by the Social Insurance Agency (Sociale Verzekeringsbank, or SVB). The SVB is not responsible for actually levying and collecting the contributions (this is the task of the tax authorities), but sees to the implementation of the national insurance schemes. As a foreign supplier, you are not in direct contact with the SVB. Your (former) employee should contact the SVB of his/her own accord if he/she believes himself/ herself to be entitled to benefits under any of the three above-mentioned insurance schemes.
The fact that a foreign employee works in the Netherlands does not mean that the Netherlands is always entitled to levy taxes or social security contributions. Perhaps only wage tax is owed, or only national insurance contributions. This is because various regulations apply.
In principle, Dutch tax law provides that wage tax is owed in the Netherlands. However, if the Netherlands has concluded a tax treaty with the employee's country of residence, this tax treaty will provide whether the right to impose tax belongs to the Netherlands or to the employee's country of residence. A tax treaty is an agreement between two countries, the main purpose of which is to prevent certain revenue from being taxed twice. A tax treaty contains the rules by which the national tax laws of the respective contracting states are harmonised.
The social security system under which an employee is insured is determined either by a social security treaty or by EU regulations. A social security treaty is an agreement between two or more parties setting forth the method of deciding under which social security system a person is insured.
Because two different types of rule are involved, it is possible that wage tax should be paid in the Netherlands under a tax treaty, while the same employee is insured and liable for social security contributions in another country (usually the country of residence) pursuant to a social security treaty or the EU regulations.