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 are levied on income up to a maximum of €37,149 with the contribution capped at €10,272 per annum. National insurance contributions and income taxes are combined in the first income tax bracket, so tax reductions and deductions do not usually deliver a social security saving. Employment Insurance of around €8,000 is paid by the employer only, and mandatory Health Insurance is also due.

Treaties

The Netherlands has social security agreements with all European Economic Area countries and more than 25 non EEA countries, including the US, Australia, China, Japan and Canada. These agreements determine which country has the right the levy social security contributions, has the obligation to 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.

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 saving status.

Exemptions

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

Administration

Netherlands Social Security contributions are integrated with the income tax regime. Other 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 most frequently 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 66 (from 2023).

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