When is a (foreign) employer required
to withhold Dutch payroll tax?

An increasing number of organisations operate across borders. Employees may live in one country and work in another, or partly work from home. This can have direct consequences for your obligations as an employer. In certain situations, you must withhold and remit Dutch payroll tax, even if your business is not established in the Netherlands.

This article explains when a foreign employer is required to withhold Dutch payroll tax and what to consider.

What does withholding obligation for payroll tax mean?

Payroll tax is a tax on employees’ wages. In most cases, the employer withholds this tax and remits it to the Dutch Tax Authorities. For most employees, this is an advance levy on their income tax.

The party responsible for withholding and remitting this tax is called the withholding agent. In most cases, this is the employer.

For employers based in the Netherlands, this is usually straightforward. For foreign employers, the situation is more nuanced.

When does a foreign employer have a withholding obligation?

A foreign employer is not automatically required to withhold Dutch payroll tax. Under Dutch legislation, there are two main situations where this requirement does apply:

1. A permanent establishment or permanent representative in the Netherlands

Do you have a permanent establishment (such as an office) or a permanent representative in the Netherlands? Then you are considered a withholding agent for payroll tax.

You must keep a Dutch payroll administration and withhold payroll tax on salaries that are taxable in the Netherlands.

2. Voluntary registration as a withholding agent

Even if you do not have a permanent establishment in the Netherlands, you can voluntarily register as a withholding agent if the Netherlands has (partial) taxing rights over your employees’ income.

In practice, this is common. For example, because:

• you already need to maintain a payroll administration for social security purposes;
• employees prefer tax to be withheld at source;
• it avoids placing full responsibility on employees to report and pay the tax via their income tax return.

NEW: Digital registration from 1 October 2026

From 1 October 2026, employers can register as a withholding agent digitally with the Dutch Tax Authorities. Until that date, registration is still handled via a paper form.

For (foreign) employers who want to register, whether voluntarily or not, this simplifies the process. However, it remains essential to assess your withholding obligation correctly and in time.

We can support you in determining your withholding position and setting up your registration and payroll processes in the Netherlands.

Please note: social security follows different rules

An important point is that social security rules differ from payroll tax rules. If an employee is insured in the Netherlands, a foreign employer will almost always need to:

• pay employee insurance contributions;
• pay the income-related contribution under the Health Insurance Act.

This also applies if there is no payroll tax withholding obligation. In other words, you may not have a payroll tax obligation, but still be required to pay Dutch social security contributions.

Withholding obligations within international groups

Within international groups, the withholding obligation can sometimes be shifted to a Dutch entity. This is possible by joint request, but only if the foreign employer qualifies as a withholding agent.

A key point is that it is not possible to shift only the employee insurance contributions. The shift must apply to both payroll tax and social security contributions.

What does this mean for you as an employer?

Cross-border employment requires a proactive approach. We advise you to:

• map where your employees actually work;
• determine in which country tax and social security are due;
• assess in time whether you have a withholding obligation;
• consider whether voluntary registration or shifting obligations within the group is appropriate.

By taking action early, you avoid unexpected issues and reduce risks.