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The Netherlands, sometimes known as Holland, is a nation in Northwestern Europe with Caribbean overseas possessions. It is the biggest of the Kingdom of the Netherlands' four component nations (the others being Aruba, Curaçao, and Sint Maarten). The Netherlands is a country in Europe that has twelve provinces and borders Germany to the east, Belgium to the south, and the North Sea to the north and west. It also has marine boundaries in the North Sea with both nations and the United Kingdom. In 2010, the Caribbean overseas territories of Bonaire, Sint Eustatius, and Saba were designated as special municipalities of the Netherlands. The official language of the nation is Dutch, with West Frisian serving as a secondary official language in the province of Friesland and English and Papiamento serving as secondary official languages in the Caribbean Netherlands. Dutch Low Saxon and Limburgish are regional languages (spoken in the east and southeast, respectively), but Dutch Sign Language, Sinte Romani, and Yiddish are non-territorial languages.
Amsterdam, Rotterdam, The Hague, and Utrecht are the four major cities in the Netherlands. The Hague is the headquarters of the States General, Cabinet, and Supreme Court, but Amsterdam is the country's most populated city and titular capital. The Port of Rotterdam is Europe's busiest seaport. Schiphol Airport in Amsterdam is the busiest airport in the Netherlands and the third busiest in Europe. The nation is a founding member of the European Union, the Eurozone, the G10, NATO, the OECD, and the World Trade Organization, as well as the Schengen Area and the trilateral Benelux Union. It is home to a number of intergovernmental organizations and international tribunals, many of which are centered in The Hague, which has earned the moniker "the world's legal capital."
The Netherlands literally means "lower countries" due to its low height and flat landscape, with just roughly half of its area rising above sea level and about 26 percent going below sea level. The majority of the polders, or places below sea level, are the consequence of land reclamation that started in the 14th century. The Netherlands is sometimes referred to colloquially or informally as Holland. The Netherlands reached a unique age of political, economic, and cultural splendor during the Republican period, which started in 1588, and ranked among the most powerful and influential in Europe and the globe; this time is known as the Dutch Golden Age. Its commercial firms, the Dutch East India Company and the Dutch West India Company, developed colonies and trading stations all over the globe during this period.
With a population of 17.6 million people living in a total area of roughly 41,800 km2 (16,100 sq mi), of which 33,500 km2 (12,900 sq mi) is land, the Netherlands is the 16th most densely populated country in the world and the second-most densely populated country in the European Union, with a density of 526 people per square kilometer (1,360 people/sq mi). Nonetheless, due to its abundant soil, moderate climate, intensive agriculture, and ingenuity, it is the world's second-largest exporter of food and agricultural goods by value.
Since 1848, the Netherlands has been a parliamentary constitutional monarchy with a unitary framework. The nation has a long history of social tolerance, having legalized abortion, prostitution, and human euthanasia, as well as maintaining a liberal drug policy. The death sentence was abolished in the Netherlands under Civil Law in 1870, but it was not totally abolished until a new constitution was passed in 1983. The Netherlands granted women's suffrage in 1919 before being the first nation in the world to legalize same-sex marriage in 2001. Its sophisticated mixed-market economy has the world's eighth-highest per capita income. In worldwide indexes of press freedom, economic freedom, human development, and quality of life, as well as happiness, the Netherlands ranks among the top. It placed eighth on the human development index in 2020 and fifth on the World Happiness Index in 2021.
Within the Dutch market, the rights of full-time employees (working 40 hours a week) are well-protected. They are legally entitled to a minimum of 20 days (equivalent to four weeks) of paid vacation each year. This entitlement is calculated by multiplying the weekly working hours by four. Interestingly, numerous businesses go beyond the mandated annual leave requirement, often offering 24 or even 32 days as a common practice.
Additionally, adhering to Dutch employment regulations, employers are required to allocate a holiday bonus equivalent to at least 8% of an employee's gross salary. This bonus typically finds its way into employees' pockets during the months of May or June, enhancing the overall compensation package and reinforcing the attractiveness of the Dutch market for both employers and employees.
There are eight official public holidays in the Netherlands.
In the Netherlands, the minimum sick leave allowance is a payout of 70% of their most recent income amount, up to a limit of two years. This is a generous privilege that reflects the social policy of the Netherlands. Some employers would also cover the entire salary.
Mothers-to-be are entitled to 4-6 weeks of paid leave before giving birth and 10 weeks of paid leave after giving birth.
If an employee takes less than 6 weeks of paternity leave before giving birth, the remaining time (up to 2 weeks) can be added to her maternity leave after the baby is born.
If the baby is born after the due date, the employee's maternity leave may begin after the actual birth and can last longer than 16 weeks.
Employers may apply to the Employee Insurance Agency on behalf of their employees for a maternity allowance (Uitvoeringsinstituut Werknemersverzekeringen, UWV).
If an employee's wife has a child, the employee is entitled to one week of paternity leave following the birth. The amount of working hours in a week is referred to as paternity leave. This paid leave can be taken at any time within the first four weeks after the child's birth. During this time off, the employer is required to pay the employee 100% of his or her salary.
Employees will now be entitled to 5 weeks of unpaid leave in the first 6 months after birth as of July 1, 2020. Employees who take unpaid leave will be entitled to demand up to 70% of their wages from the Employment Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV).
Parents with children under the age of eight are eligible for parental leave, which allows them to spend more time with their children. In most cases, parental leave is unpaid; however, certain employers may pay a portion of the salary during this period. Every week, each parent is entitled to 26 hours of vacation.
Adoption Leave (6 Weeks). Employers have the option to seek an adoption leave payment (Uitvoeringsinstituut Werknemersverzekeringen, UWV) from the Employee Insurance Agency on behalf of their employees.
Emergency Leave and Short-Term Absence. Emergency leave, designed for unforeseen personal circumstances demanding immediate time off, includes situations like arranging care for an ill family member or coping with a family bereavement. Approval of emergency leave is essential and the responsibility of the Dutch Employer of Record. Throughout this absence, it remains the duty of the employer to sustain the employee's wage.
Short-Term Care Leave. Within a span of 12 months, employees can avail short-term care leave twice, equivalent to their working hours. During this period, the Dutch Employer of Record is liable to cover 70% of the employee's salary. Should the minimum wage exceed this, the employer pays the minimum wage.
Long-Term Care Leave. In a 12-month cycle, employees can take up to 6 times their working hours as long-term care leave. It's important to note that during this extended absence, the employer isn't obligated to maintain wage payments for the employee.
In The Netherlands, the employer has generally five ways to terminate the employment agreement: termination by mutual consent or by means of a settlement agreement; termination proceedings before the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV), termination proceedings before the cantonal court, termination with the consent of the employee, or by urgent dismissal.
The length of an employer's notice period is determined by the duration of the employment contract, but is limited to four months. There will be a one-month notice period for employment of less than five years. There will be a two-month notice period for employment durations of between five and ten years. There will be a three-month notice period for employment durations of between ten and fifteen years. The notice period is four months for employees who have worked for the company for more than 15 years. An employee's statutory notice period is one month.
A trial period's duration is determined by the duration of the employment contract. It may not, however, exceed a two-month period. The employer and employee are both covered by the same period. Temporary employment contracts lasting more than six months but less than two years, as well as temporary employment contracts with no end date, are subject to a one-month probationary period. Permanent employment contracts are subject to a two-month probationary period.
Beginning on the first day of employment, an employee is entitled to a severance payment (referred to as a transition payment) in the event of an employer-initiated dismissal. For Dutch employees, the transition allowance is equal to 1/3 of their monthly salary for the first year of service beginning on the first day of work.
In the Netherlands, the standard workweek ranges from 36 to 40 hours, spread across five days. To ensure compliance with legal entities, employees are prevented from working beyond nine hours per day. Shifts are capped at 12 hours each, with a maximum weekly work limit of 60 hours. It's important to highlight that extended periods of maximum work hours are controlled. Specifically, an employee's average weekly hours must not surpass 55 over a four-week period or 48 hours per week within a span of sixteen weeks. Ensuring adherence to these regulations is overseen by the Employer of Record Netherlands.
Overtime is not regulated by Dutch law; it is typically agreed upon in individual employment contracts and collective bargaining agreements.
The minimum wage in the Netherlands for workers 21 and older is 1,684.80 EUR per month as of January 2021. On July 1, 2021, this rate will rise to 1,701.00 EUR. However, the minimum wage rate could change if your employee is covered under a collective bargaining agreement (CBA). To prevent misconceptions, it is best practice to specify the proper minimum pay in a formal employment contract that the employee signs before their first day.
According to Dutch pay rules, every employee in the Netherlands receives an 8% vacation allowance as a bonus. This allowance is accrued monthly, and companies typically pay it out once a year in May.
As an employer in the Netherlands, it's essential to be aware of your obligations and perks for workers. One significant responsibility is paying 7% (2021) of your employees' gross yearly income, capped at €58,311, to the Healthcare Insurance Act (ZVW or Zorgverzekeringswet). This payment is calculated based on their basic wage and remitted to the Dutch Tax Department.
Moreover, all residents and employees in the Netherlands are legally required to arrange for at least the basic healthcare package individually. The cost of this package varies between €95 to €125 per month, depending on the employee's "own risk."
Rest assured, the basic health insurance package offers comprehensive coverage, encompassing essential medical treatments, medicines, and medical aids aligned with current medical practices. It even includes specific physiotherapy and dental care treatments (source: Ministry of Health, Welfare, and Sport, "Healthcare in the Netherlands," 2016).
Keep in mind that all medical and other insurance allowances are considered taxable advantages.
In addition to these obligations, Dutch employers often provide attractive perks to their workforce. Common perks include travel stipends for leased vehicles or covering 100% of commuting costs through train or bus tickets.
As you navigate the intricacies of employer responsibilities and employee benefits in the Netherlands, consider how partnering with a reputable Dutch Employer of Record can streamline compliance and enhance your employees' experience.
In general, CIT is levied on a Dutch resident company's global revenue. Certain types of income, however, may be exempted or excluded from the tax base. Non-resident entities only have a limited tax obligation for revenue derived in the Netherlands.
The typical CIT rate is presently set at 25%. There are two income tax brackets. The first income category is subject to a reduced rate of 15% (16.5% in 2020). This tax band has been expanded to include taxable income up to 245.000 euros (200.000 euro in 2020). The standard rate is applied on any excess of taxable income. In 2022, the first tax rate will be expanded to include taxable income up to 395.000 euros.
In the Netherlands, income tax plays a pivotal role for both residents and non-residents, a vital consideration for businesses engaging in global expansion. The collection of income taxes falls under the jurisdiction of the Tax and Customs Administration, with calculations structured around three distinct categories termed "boxes."
The first box encapsulates income from diverse sources, taxed progressively. Tax rates range from 37.35% for lower incomes to 49.50% for higher brackets. Individuals can leverage personal allowances, deduct certain expenses like donations, medical or educational costs, and maintenance fees before tax assessment. Those beyond official retirement age might enjoy reduced tax rates.
Income stemming from significant business ownership falls within the second box, taxed at a fixed 25%. This pertains to a stake of at least 5% in shares, options, or profit-sharing certificates, whether solely or jointly with a tax partner.
The third box addresses wealth-based income, taxing wealth at a rate of 30%. Calculations consider asset value minus liabilities, assuming a standardized return on investments. Predicted profits are estimated annually, incorporating historical market trends. Tax breaks apply to capital gains.
Tax obligations align with the calendar year, requiring income tax returns to be filed by May 1 of the following year. Typically, married spouses undergo joint evaluations, excluding divorce cases.
Navigating Dutch income tax intricacies can be intricate. Seeking guidance from a reliable Dutch Employer of Record (EoR) partner proves advantageous for tax law compliance and optimization. EoR services in the Netherlands, whether for residents or non-residents, offer expert support in effectively managing income tax affairs during your global expansion endeavors.
For businesses operating as legal entities, Value Added Tax (VAT), known as Belasting over de Toegevoegde Waarde or btw in Dutch, is pertinent. This tax is applicable to the provision of goods and services within the Netherlands, importation, and ‘intra-European' purchase of goods. VAT is categorized into three rates: 21%, 9%, and 0%.
The standard VAT rate is set at 21%. A reduced 9% VAT rate is applicable to essential goods, specific energy-saving insulation for homes, and certain e-publications.
Furthermore, a specialized 0% VAT rate is primarily associated with intra-EU supplies, the export of goods beyond the EU, commodities stored in bonded warehouses, related services, and select foreign services. It's essential for legal entities to grasp these VAT intricacies for effective financial management.
When considering global expansion, it's important to note that EU/EEA/Swiss citizens are exempt from obtaining a residence or work permit. However, they do require a residency permit for access to social security benefits.
For nationals of the United States, Canada, Japan, Australia, New Zealand, and non-EU/EEA/Swiss foreign nationals, securing an "authorization temporary stay" (MVV) from the Dutch embassy or consulate in their home country is essential prior to entering the Netherlands.
To navigate these regulations during your global expansion, the employer holds the responsibility of submitting a work permit application to the Social Security Office (UWV). This demonstrates efforts to prioritize hiring Dutch/EU/EEA/Swiss nationals first. It's crucial to note that no candidate is permitted to work in the Netherlands until their work permit is duly issued.
In accordance with Netherlands' employment law, it's essential that employment contracts are prepared and presented in the local language. These contracts can take the form of indefinite arrangements or span a specified period, not exceeding three years. The subsequent sections highlight the pivotal components encompassed within the employment contract:
The employment contract may include a trial period that is no longer than one month if the contract length is two years or less, or two months if the contract term is more than two years.
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
Before embarking on global expansion to the Netherlands, thorough considerations are crucial. Begin by defining your industry and the type of company you intend to establish. Assess existing commercial affiliations that could benefit from a Netherlands base, potentially impacting the choice of headquarters among the country's 12 provinces. While Dutch laws are generally consistent, slight variations could occur based on your chosen location.
While English is officially recognized, Dutch serves as the national language. Additionally, regional languages like Frisian may also come into play. Assess the linguistic requirements for effective business operations in specific regions, potentially necessitating translators or staff proficient in these diverse dialects.
Moreover, delve into Dutch subsidiary regulations that could influence your workforce. While EU citizens experience relatively seamless travel within EU member states including the Netherlands, non-EU or EEA individuals necessitate residency permits (MVV) or work permits (TWV). Specific regulated professions in the Netherlands require recognized qualifications, a prerequisite for professionals entering these roles.
Following a discussion of these criteria, the Netherlands subsidiary procedure consists of the following steps:
In the Netherlands, the prevalent form of subsidiary is the private limited liability corporation, commonly referred to as a Besloten Vennootschap or BV. Alternatively, you have the option to establish a public limited liability company recognized as a Naamloze Vennootschap or NV.
It's important to note that the legal stipulations surrounding subsidiaries in the Netherlands vary based on the chosen business structure. For instance, establishing a BV necessitates a minimum share capital of 1 EUR. Among the shares, at least one should possess voting rights, while another must hold profit rights, or potentially a single share could encompass both attributes. Additionally, BVs are prohibited from issuing share certificates or bearer shares. Conversely, NVs require a minimum share capital of 45,000 EUR, albeit without encountering the same constraints as BVs. Understanding these nuances within employment law is crucial when forming subsidiaries in the Netherlands.