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Q & A on Living in the NetherlandsEverything expats ever asked - click on a question for a quick link to the answer, or scroll down to read the entire section.. Q: Is it possible for a company to work with non-Dutch nationals in the Netherlands? Q: Is a work permit required when sending an expat to the Netherlands to set up the business? Q: When can a work permit be obtained for an employee? Q: When is a residence permit required? Q: When does an expat require a temporary residence permit (MVV Machtiging tot Voorlopig Verblijf)? Q: What is the Knowledge Migrant program? Q: Are partners allowed to work in the Netherlands? Q: What aspects of social security are important when sending staff to the Netherlands? Q: What influences the compensation structure of an international assignment? Q: How do I determine the income of an individual to be sent on a foreign posting? Q: Where does the expat pay taxes? Q: What are the benefits of the 30% ruling in the Netherlands? Q: What conditions need to be met in order to qualify for the 30% ruling? Q: When an individual does not qualify for the 30% ruling, is other tax planning available? Q: What rules apply to the expat regarding (health) insurance and how is healthcare organized? Q: What is the cost of living? Q: Are there international schools in the Netherlands? Q: Is there temporary housing available and what does it cost? Q: Do expats get a social security number? Q: What are the requirements for expats driving a car? Q: What is the percentage of Dutch people in the Netherlands that speak English? Q: How safe is it to work and live in the Netherlands? Q: What is the quality of life in the Netherlands? Q: Where can I find resources that can help me find my way in the Netherlands? Q: From an organizational point of view, what are the most important things to pay attention to when sending staff abroad?The most important thing you can do is have a consistent policy. This kind of consistency lets your assignees know what to expect. And of course, one of the givens is a little hand-holding on practical matters regarding the relocation, not just prior to the assignment, but after the assignee returns home as well. Finally, you must also ensure legal compliance (tax, immigration, employment law, etc.), and manage the delivery of information and/or services. Q: Is it possible for a company to work with non-Dutch nationals in the Netherlands?Yes, the Netherlands allows you to hire foreign nationals. But like other countries, the Netherlands regulates the number of foreign workers in the country. Employees who are nationals of countries outside the EU must have a work permit (except for Knowledge Migrants, which we'll discuss more fully below). As far as EU citizens are concerned, as well as citizens of Iceland, Norway, Liechtenstein and Switzerland, no work permit is required. Q: Is a work permit required when sending an expat to the Netherlands to set up the business?If the expat is planning on working in the Netherlands for longer than three months, a work permit is required, unless he or she is EU citizen or a citizen of Iceland, Liechtenstein, Norway or Switzerland. Note that citizens from Bulgaria and Romania still require a work permit until these countries have also officially been admitted to the EU. A business visa is only meant for foreign nationals who are not planning to take up residence or who are not going to perform regular work and who will conduct business for no longer than three months. However, EU citizens and citizens of Iceland, Liechtenstein, Norway or Switzerland do not need such a business visa and are allowed to enter the Netherlands on their (valid) passport alone. Citizens from Canada, Japan, Israel, Hong Kong SAR, Singapore, Switzerland and the United States are also exempted. Q: When can a work permit be obtained for an employee?Immigration law in the Netherlands is a little tricky. Many different rules - and exceptions to these rules - apply. Therefore, each case needs to be determined on its own merits. For the purposes of this website, we focus only on situations where employers need to send staff to the Netherlands to perform 'permanent' employment activities, as opposed to situations like training programs, implementation of products sold to Dutch clients, etc. For regular personnel transfers, you can't be granted a work permit until you demonstrate to the authorities that the Dutch and European employment market does not have a suitable candidate, or someone to fulfill the position after a short training period. However, there are two instances in which recruiting from the European market is not a prerequisite: First, when the assignment qualifies as an intra company transfer. In order for a posting to qualify as an intra-company transfer - a transfer from the company's head office or other worldwide offices to the Netherlands - certain conditions need to be met with regards to the company's annual turnover and salary level of the position. Second, from time to time, the authorities can indicate that a shortage exists within certain fields. If the employee is working in one of these fields, the procedure to obtain a work permit is less complicated. In general, the employer is required to first report the vacancy to the Dutch Labor Agency, as well as to the European Labor Agency (EURES). Then you must recruit for at least 5 weeks, and up to 3 months. When recruiting, you're required to use as many potential contacts as possible: not only the Dutch Labor Agency and EURES, but also newspapers, professional literature, headhunting companies, professional magazines, etc. For some higher-level positions, it is not necessary to recruit via government agencies - recruiting via headhunter will do. Work permits are issued for a maximum of three years. After three consecutive years of legal employment in the Netherlands, you no longer need a work permit, provided an endorsement is stamped on your residence permit. Q: When is a residence permit required?
It depends on nationality. All EU citizens and nationals from Liechtenstein, Norway, Iceland and Switzerland are allowed to take up residence in any EU country. Note that citizens from Bulgaria and Romania still require a residence permit until these countries have also officially been admitted to the EU.
While the above are the general requirements, the exact rules can change with new legislation, as well as with the nationality of the employee involved. More detailed information can be obtained after contacting the relevant municipal administration where the individual intends to apply for his or her residence permit. It is important to identify at an early stage which documents are required, since certain documents may need to be legalized, and even verified in the case of certain countries, often a time-consuming process. Q: When does an expat require a temporary residence permit (MVV Machtiging tot Voorlopig Verblijf)?Prior to their move to the Netherlands, certain nationals that plan to work and live in the Netherlands need to apply for a temporary residence permit (MVV) which is a special travel visa that they need to travel into the Netherlands.
People of all other nationalities should apply for their MVV at the Netherlands Embassy or Consulate in their country. Q: What is the Knowledge Migrant program?This program is an incentive the Netherlands created to attract so-called 'knowledge workers' to the country. Basically, to qualify as a 'knowledge worker' the only condition that needs to be met is a salary criteria. For employees, under age 30 this is € 46,541, and for employees of 30 years of age and older, this is € 34,130 (amounts for 2007). Under the knowledge migrant program, a visa can be obtained for the period for which there is a labor contract, with a maximum period of five years. The processing time for this permit is approximately two weeks. After expiration of the five-year period, the individual is eligible for permanent status in the Netherlands, although certain formalities need to be met. One is that the company is registered with the authorities for use of this special procedure. While the knowledge migrant program was devised to relieve employers from the burden of recruiting only from the Dutch and European employment market, there are some disadvantages as well. For example, take individuals that do not require an authorization for temporary stay (MVV). Because they have to be present, but are not allowed to work in the Netherlands until the visa has been issued, they have to be on a 'forced vacation' until the visa has been granted. Currently, those processing times cannot be guaranteed. So for individuals who do not require an authorization for temporary stay, the standard procedure may be more beneficial. While more formalities are involved, it allows employees to start working in the Netherlands upon arrival in the country, which, in the end, saves the employer money. Another alternative can be to apply for an authorization for temporary stay, even though this is not formally required. In any case, immigration matters are complicated, so you need to make sure that you speak with an immigration specialist prior to sending someone to the Netherlands. Q: How long does it take to process an application for temporary stay (MVV), a work permit and a residence permit in the Netherlands?The application for an authorization for temporary stay can take 2 to 3 months. The application for a work permit usually takes 10 weeks - 5 weeks for the recruiting efforts, and 5 weeks processing time. In certain cases, the recruiting period may be extended up to 3 months. Exceptions apply in the case of intra-company transfers, which generally take a total processing time of five weeks. Please remember that while it can take up to six months to obtain a residence permit after filing, additional time to obtain legalization of the application may be required prior to filing - which, again, can add time to the process. Q: Are partners allowed to work in the Netherlands?When one partner has obtained a work permit under the knowledge migrant program or intra-company transfer, the other partner is allowed to work in the Netherlands as well. As a matter of a formality, the partner must still apply for a work permit, but this permit is granted without further checks. In all other cases, the non-working partner typically follows the working partner in terms of permit application rules. For example, in a case in which the partner does not need a permit because of nationality, no work permit is required for the non-working partner. In cases where the working partner requires a work permit, a partner who subsequently starts working in the Netherlands then also requires a permit. Q: What aspects of social security are important when sending staff to the Netherlands?First, you must find out if the individual will be covered by the Dutch social security system. In most cases, coverage applies when someone is sent to the Netherlands to live or perform employment activities. Then, you need to determine whether this local Dutch rule is overruled by a so-called totalization agreement: a bilateral or multilateral treaty, in which it is determined which country's social security system applies to individuals that have an international career. The totalization agreement can state that an individual remains exclusively covered by the social security system of his home country for a certain period of time, provided certain conditions are met. When a totalization agreement is applicable, it may be possible that no Dutch social security contributions are due for a certain period of time (under the agreement with the US, for example, a 5-year period). Instead, home country contributions will be due. Where no totalization agreement is applicable, Dutch social security contributions will be due. The Netherlands has a well-developed social security system, which provides essentially two categories of social insurance: national insurance programs covering all resident individuals, and employees' insurance programs, applicable to employees only. Under the employees' insurance programs all employees are insured against the financial consequences of sickness, Sickness Benefits Act (WULBZ) and Health Insurance Act (ZVW), long-term incapacity for work, Work and Income according to Labor Capacity Act (WIA), and unemployment, Unemployment Benefits Act (WW). This part of the social security is funded from contributions paid by employers (the biggest part) and employees. For more information see the Labor Section. Q: What influences the compensation structure of an international assignment?Obviously, the compensation structure is a very hot topic with all assignees. That's why we recommend you have a standing policy in place on which compensation is determined. This will ensure that all associates in comparable circumstances not only are treated equally, but feel that they are treated equally as well. It is important that the assignment policy is in line with other human resources policies that exist within the company, and that the policy supports your business goals. For example, when a company is used to taking care of its employees 'from the cradle to the grave', an assignment policy that only covers basic issues will not meet expectations, and vice versa. Also, a policy needs to make a distinction based on the duration of an assignment. Different policies may exist for categories such as business trips, short-term assignments, long-term assignments and permanent transfers. Obviously, an assignee who is transferred permanently will have much different needs than someone simply sent on a business trip. Also, once a policy is in place, it is important to benchmark this policy, from time to time, against evolving industry standards. Q: How do I determine the income of an individual to be sent on a foreign posting?A wide variety of alternatives exist in the marketplace. Most methods are either home based or host based. A home-based approach uses the situation in the home country as a starting point. The home country salary is increased by certain allowances, and then used as host country income. Everything remains the same as much as possible as if the individual were not on assignment. In order for the associate not to lose out as a result of higher costs, additional benefits are paid. A host-based concept focuses more on a compensation package that is comparable to peers in the host location and therefore uses host-country compensation as a starting point. Host-country compensation is then increased to reimburse for certain costs a 'local employee' will not be faced with, like temporary housing and home leave trips. The most common approach for assignments of up to five years is the home-based approach. The most common host-country approach is often referred to as the 'balance sheet approach.' Q: Where does the expat pay taxes?Every individual who lives in the Netherlands theoretically pays taxes on his or her worldwide income. Non-residents pay tax on income from Dutch sources. Although tax on employment income is normally withheld at the source, taxpayers are usually still required to file an individual income tax return after the completion of a tax year. This allows taxpayers to report additional income, claim certain deductions, and to offset the pre-levied wage tax against income tax due. To understand the Dutch individual income tax system, you have to look at what the Dutch tax code considers three different 'boxes' of income.
The first box includes income from entrepreneurship, from employment and from a principal residence. This income is taxed at progressive tax rates, ranging from 1.8% to 52%. This is also the category where most of the deductions can be claimed. The second box only applies to individuals owning a significant shareholding in an entity. The third box applies to passive investment income. Under this box, however, no actual interest, dividend or capital gain income are taxed. The taxable basis in the third box is the average value of assets on January 1 and December 31 of a particular year. This average value is deemed to generate 4% return on investment, which is taxed at 30%. The effective tax rate therefore amounts to 1.2% The overall tax burden, resulting from Boxes I, II and III is then reduced by certain credit amounts for the taxpayer and his or her partner (even though the partner has no income of his/her own). Therefore, even though only one of the partners may have employment income, the spouse may be required to file an income tax return too, in order to claim certain credit amounts. Q: What is tax equalization?Tax equalization is one of the ways in which an individual can be compensated for a difference in tax rates between home and host countries. Tax equalization can be part of the balance sheet approach, but is sometimes used separately, too. The point of tax equalization is that the assignee does not pay any additional tax compared to when he was living in the home location. Therefore, the net salary of an individual is determined as follows:
The hypothetical tax is determined by taking the stay-at-home income (the income the assignee would have earned had there been no foreign assignment), and determining the amount of tax on this income, had the individual not been working abroad. The assignee does not pay this hypothetical tax to tax authorities anywhere in the world. He pays this amount to the employer. In exchange for paying the hypothetical tax, the employer agrees to bear all actual taxes payable by the employee. Before agreeing on tax equalization, it is important to distinguish to what income it will apply. Regular employment income is usually included, but spousal income, stock option income, income from passive investments, and capital gains are not always treated in the same way in tax equalization plans. Q: If tax-equalized employees are not faced with the tax burden on equalized income, do they still need to have a good understanding of the Dutch tax system?Yes, even though an employee may be tax equalized, being aware of the rules that apply in both the host location and the home location is still necessary. Let's focus on how this applies to host-country issues. There are several reasons why it is important to have a proper understanding of the tax rules in the Netherlands. First, while the individual does not bear any Dutch tax liability on equalized income, all income may not be equalized. Depending on the equalization policy implemented, certain exceptions may apply, like passive investment income or partner income. So, for the income that's subject to Dutch taxes, knowledge of the Dutch tax system is essential. But even when someone is fully tax equalized, that person is still responsible for record keeping, submitting information to the tax consultant, and, ultimately, for filing correct tax returns with the authorities. Since the individual is still regarded as the taxpayer, non-cooperation may have undesired personal consequences. While tax equalization may take away part of the impact of Dutch taxes for individuals on assignment in the Netherlands, it is still imperative for the individual to understand their tax position, filing obligations and know which records to keep during the year. Q: What are the benefits of the 30% ruling in the Netherlands?The 30% ruling is an arrangement under which 30% of the income of an individual can be paid tax free. This brings the effective top tax rate down from 52% to 36.4%. In addition to this benefit, the ruling states that employer contributions to a qualifying international school can be made tax free. Also, the individual can elect to be taxed as a 'partial nonresident,' which means there is no Dutch passive investment income tax on non-Dutch investments. To US citizens or US green-card holders, a special provision applies when they are taxed as a partial nonresident. They are only taxed in the Netherlands to the extent they earn income in the Netherlands (in case they qualify as an employee), or to the extent they earn income in all countries except as a director of a US company. Q: What conditions need to be met in order to qualify for the 30% ruling?To qualify for the ruling:
To determine whether an employee brings specific expertise not readily available on the Dutch employment market, education, career history and salary are decisive factors. A special facility exists in case individuals have been employed for at least 2 1/2 years within the same group of companies. Under this special facility, it is easier to qualify for the ruling. When granted, the 30% ruling is, in principle, valid for a 10-year period. However, specific rules apply in case the individual has had periods of prior employment or stay in the Netherlands, in which case the duration will be reduced. For example, individuals who have spent more than 10 years in the Netherlands in the past, may not be granted the ruling. Q: When an individual does not qualify for the 30% ruling, is other tax planning available?Yes, in the Netherlands possibilities exist to reimburse so called 'extraterritorial expenses' to employees, tax free. To benefit from this specific provision, it is important to take a close look at the compensation structure to optimize tax benefits. Examples of extraterritorial expenses are a cost of living allowance, as well as home leave trips. Q: What rules apply to the expat regarding (health) insurance and how is healthcare organized?As of January 1, 2006, the Netherlands has one legal health insurance system for everyone. Every person who lives or pays payroll tax in the Netherlands - including expats - receives compulsory health insurance based on the new Health Insurance Act ('Zorgverzekeringswet'). Health insurance companies are obligated to accept everyone for the standard package, irrespective of gender, age and health. This acceptance obligation does not apply to the complementary health insurance that someone may want to take out on his own. See the Labor Section for further details about how health care insurance is organized in the Netherlands. The following acts also deal with compulsory insurance for anyone employed in the Netherlands: Sickness Benefits Act (WULBZ), Work and Income according to Labor Capacity Act (WIA), Unemployment Insurance Act (WW). The Netherlands also has a number of national insurance programs that cover all persons living or working in the Netherlands: General Old Age Pensions Act (AOW), General Surviving Relatives Act (ANW), Exceptional Medical Expenses Act (AWBZ), and General Child Benefit Act (AKW). Medical care in the Netherlands is comparable to the best in the world. As soon as someone gets settled, they'll need to look for a general practitioner or family doctor, 'huisarts', which is the first point-of-contact for any medical questions or treatment. When necessary, the huisarts will refer patients to a specialist. There are many excellent hospitals in the Netherlands - and almost all doctors speak English. Q: What are the consequences of transferring international staff with respect to their pension position?In general, an individual can remain in the home country pension plan while working in the Netherlands. However, the Netherlands will, in principle, tax the pension accrual. This can be avoided by obtaining a corresponding acceptance from the Dutch revenue authorities. Once this is obtained, the pension can be accrued on a tax deferred basis from a Dutch point of view. One of the conditions that needs to be met in order to obtain a corresponding acceptance is that a bank guarantee be submitted to the authorities, securing tax claims on the pension accrual in case the employee breaches the conditions for obtaining that corresponding acceptance. Another option is to tax pension accrual in the Netherlands. Therefore, the final decision depends not only on the tax implications, but also on the administrative cost to achieve this optimum tax position. Please note that EU citizens are not required to submit such a bank guarantee. For them, obtaining corresponding acceptance can be beneficial. Q: What is the cost of living?The cost of living in the Netherlands compares favorably with that of other countries. For instance, UBS performed standardized price and earnings surveys in 70 cities around the world, based on exchange rates and inflation at the end of 2004. Amsterdam was more affordable than London, Zurich, Chicago, Geneva, Dublin, and Basel. And when the Economist Intelligence Unit (EIU) compared the Netherlands to other European countries, based on its index of a basket of goods and services, excluding housing, they found it to be more affordable than the U.K., Ireland, and Switzerland.
Q: Are there international schools in the Netherlands?Throughout the Netherlands there are international schools, both primary and secondary, following the American, British, French as well as International and European systems of education. There are also a number of Dutch schools with special departments, English Streams. These Streams provide two possibilities: a gradual integration into the Dutch education system or, after passing through the English stream, taking the International Baccalaureate. All international schools are specialized in accepting children in the middle of the term, and are used to providing additional English language instruction, if necessary. As for higher education, there are about 1,000 international study programs and courses that are taught in English. These cover a broad range of fields. Curricula are intensive and, at an advanced level, practically oriented. The courses alternate theory with practice in real or simulated work situations. Most study programs and courses lead to a bachelor's degree, a master's degree, a PhD, a diploma or certificate. For a more complete listing of international schools, go to the Links Section of this website. Q: Is there temporary housing available and what does it cost?There is a large variety of property to choose from in the Netherlands. Many rental properties are available in the so-called Randstad area (Rotterdam, The Hague, Amsterdam), in the northwestern part of the country. Rental prices here are somewhat higher compared to other parts of Europe, but below rent levels in capitals such as London or Paris. The sales market is tight. Still, like anywhere else, if you are considering staying for a longer period of time, it may be worth it to buy property rather than rent. The transaction costs of buying a house are approximately 11 percent of the purchase price as well as additional costs, such as contractors' fees., etc. The main advantage to buying in the Netherlands is the tax advantage: the interest paid on a mortgage is fully deductible on your income when you use the house as your principal place of residence. So too are expenses related to the mortgage, such as the notary fee, registration fee, bank fee and appraisal fee. Q: Do expats get a social security number?Everyone who is employed legally in the Netherlands, including expats, has a social service number ('Burgerservicenummer' or BSN) for tax and social security purposes. This number can be obtained at the local tax office (please go to the Links Section on this website for contact info). This number is necessary for businesses to pay their employees and to ensure that contributions to their benefits are properly credited. Q: What are the requirements for expats driving a car?Dutch law requires that all residents of the Netherlands, regardless of nationality, obtain a Dutch driver's license to operate a motor vehicle. Holders of drivers licenses in one of the EU member states are allowed to drive on their foreign license for up to one year after settling in the Netherlands. Other nationalities have a grace period of six months during which they must obtain their Dutch driving license. Depending on your nationality, you may be able to exchange your national driving license for a Dutch license, or you will have to take a driving test. Tourists are allowed to drive in the Netherlands on a valid national license, preferably in combination with an International Driver's License. Third-party liability insurance is required by law. Cars are driven on the right-hand side of the road and national roads and highways are excellent. However, newcomers may find driving in town a little disconcerting in the beginning because of the many bicycles on the road. Q: What is the percentage of Dutch people in the Netherlands that speak English?As you can see from the chart below, more than 80% of the population speaks English well, which makes the Netherlands the leading English-speaking nation in continental Europe. With people from all over the world, you can easily find employees who are fluent in any language your company requires.
Q: How safe is it to work and live in the Netherlands?The Netherlands is a safe country to live in. Your children can safely ride their bikes to school and you can safely go out to dinner even in the 'big' cities and even after dark. In the smaller towns, life is even safer. Streets are generally well-lit in the cities and towns in the Netherlands, so that you can safely let out your dog in the evening, run to the supermarket or walk to your friends' house a couple of streets away. When you leave the house, however, it is always best to lock the door. In the big cities, you should take the same precautions you'd have to take almost anywhere else in the world. Q: What is the quality of life in the Netherlands?Based on indicators such as rent, clothing, food and transport, the Netherlands is one of Europe's top countries for an overall good standard of living. According to the 2007 Quality of Life Index conducted by internet magazine International Living, the Netherlands ranks third as the most pleasant country to live. To produce the annual index, which includes 193 countries, the magazine considers nine categories: cost of living, culture and leisure, economy, freedom, health, infrastructure, safety and risk, and climate. Holland ranked considerably well when it came to personal freedom and healthcare. Q: Where can I find resources that can help me find my way in the Netherlands?There are many organizations established to help new businesses and expats in the Netherlands. Most address specific concerns the newcomer may have, such as IT or payroll. For a complete listing, just go to the Links Section on this website. |
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