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In this article we will discuss the social security contributions of an employee who is a resident of the Netherlands. Different social security rules may apply for people who are self-employed, a director, freelancer, working in aviation and so on.
An increasing number of people are working in cross border situations nowadays, which can make it challenging to know in which country you’re supposed to pay income tax and social security contributions.
It’s important to know that if you are subject to income tax in the Netherlands is does not automatically mean that you are also subject to social security contributions, and vice versa. Social security contributions and income tax have a completely different set of rules.
The country where a resident pays social security contributions is also the place where he is insured for the basic health insurance. The latter can have severe consequences in case a resident is paying premiums for health insurance which should have been paid to a different country.
The Dutch social security contribution is levied together with income tax. The contribution is 28,15 percent of your salary, but will never exceed about 9.400 euros.
In principle, every Dutch tax resident is liable to pay social security contributions on their earned income. The Dutch residency status is determined by facts and circumstances such as the place where you live, your family ties, where your main source of income is, along with your intentions.
The social security contribution is considered as a coverage for state pension, surviving partner pension and it covers specific health costs. It is not considered as an income tax although it can be experienced in this way since the tax authorities are collecting the social security contribution together with the income tax.
Although the income tax and social security contribution are levied together, there are different rules applicable to determine if a Dutch resident (employee) is liable for social security contributions.
The following also applies to the EFTA member countries (European Free Trade Association). The countries include Switzerland, Norway, Iceland, Lichtenstein, Norway and Switzerland:
The EU has regulations that determine in which country a resident has to contribute to the social security system. The general rule states that a Dutch resident (employee) is insured for the social security in the country where he is living. However, it’s becoming increasingly common that employees work in more than one country.
A resident of the Netherlands maintains social security in the Netherlands if they work at least 25 percent in the country.
This also includes the time that is worked from home for the employer. If less than 25 percent of working time is spent in the Netherlands, the employee is insured in the country where the employer is officially established.
There are some specific rules applicable in case the employee works for different employers.
A Dutch employee who is assigned to work abroad for his Dutch employer can apply for an A1 statement. In this situation the employee continues to be insured in the Netherlands.
The same applies to an employee residing abroad who is assigned to work in the Netherlands. The employee is subject to pay income tax but continues to be insured in the country of assignment.
No Dutch social security contribution will be owed. The A1 statement is granted for a maximum period of five years, and the A1 statement is only applicable among EU-member states, EER countries and Switzerland.
A similar statement can be granted for employment situations between the United States and the Netherlands. This is called a 101 statement. A US resident that is assigned to the Netherlands can apply for a 101 statement in the US which will allow them to continue to be insured in the US. There are no Dutch social security contributions due in this case either.
The same applies to a Dutch resident who is assigned to the US. In this case the Dutch resident maintains social security in the Netherlands.
There are several social security treaties concluded by the Netherlands for situations in which a Dutch employee works outside the EU. It depends on the specific treaty in which country the employee will be insured.
In case there is no social security contribution treaty applicable, the Netherlands will apply Dutch unilateral rules to determine the social security contribution of a Dutch employee who is working outside the EU.
In every cross border employment situation it’s important to establish in which country you will be covered by social security legislation, and where you need to pay your contributions accordingly.
It’s recommended to reexamine this issue on a regular basis in order to prevent surprises after filing your income tax return, and to prevent having to pay in more than one country.
Social security contributions rules are complicated and it’s therefore advisable to seek expert assistance. Are you still unsure how this applies to your particular situation?
For this and any other questions, you can contact Elisabeth Bouwer. She's a senior tax advisor at Broadstreet, providing specialist services to expats in the areas of tax, mortgages, pensions and investment advice.