Summary

The Netherlands operates a comprehensive social security system which provides a range of old age, invalidity, sickness, unemployment and other social benefits, including family allowances and long term care. Entitlement to benefits generally derives from and individual’s contribution history, although some benefits arise due to residence.

Details

Contributions

Dutch National insurance contributions for employees are levied on income up to a maximum of €38,883 with the contribution capped at €10,751 per annum.

Unemployment Insurance of up to €6,146 (depending on the employer’s industry) is paid by the employer only, as is disability insurance (up to €6,059). Mandatory Health Insurance is also payable by the employer up to a maximum of €4,844 per year if annual income exceeds €79,409). The maximum possible employer social security cost is in the region of €18,000 per year.

Treaties

The Netherlands has social security agreements with all European Economic Area countries and more than 25 non EEA countries, including the UK, US, Australia, China, Japan and Canada. These agreements determine which country must levy social security contributions and provide benefits, and prevent social security being levied twice on the same income. Most inbounds expatriates to Netherlands therefore continue to pay home country social security rather than Netherlands contributions. Most agreements allow for up to five years of continued home country coverage, but in the case of the UK, this is limited to two years. Special rules apply to individuals working in the Netherlands and other EEA countries (plus the UK) on a regular basis.

As Netherlands social security contributions are not high, there could be a cost advantage of local hiring as opposed to expatriation. However the impact of this on the availability of the 30% ruling for tax purposes may actually eliminate any savings. Third country employment could be considered to deliver savings while preserving the expatriate tax deduction.

Exemptions

The 30% ruling for expatriates and other deductions do not generally have the effect of reducing NL social security due to social tax contributions being integrated with the lowest income tax band.

Administration

Netherlands Social Security contributions are integrated with the income tax regime. Contributions for the five main elements of social security are calculated and collected through payroll.

Benefits

Benefit entitlements for those working in the Netherlands are usually covered by EU social security regulations. These provide that even while continuing to pay contributions in the home country, if covered by an A1 certificate, Netherlands benefits can generally be accessed. From a retirement point of view, if contributions have been paid in the Netherlands, these will deliver a pro-rata Dutch pension which can be drawn from age 67. Full pension entitlements are dependent on an individual having made fifty years of contributions.

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