What You Need to Know About Taxes as a First-Time Employee in the Netherlands
Did you just get a job in the Netherlands and want to know how to do your taxes now? First of all, congratulations! Starting work here brings exciting opportunities, but it also means learning how taxes affect your new income. In this article, we will help you make sense of your paycheck by walking you through the basics of the Dutch tax system, including income tax, tax credits, and deductions.
Dutch tax system: a quick overview
The Dutch tax system is progressive, meaning the more you earn, the higher your taxes are. In the Netherlands, income is divided into three types or “boxes,” with Box 1 (employment and home ownership income) being the most relevant for employees. The income tax due is the total from all boxes combined, however in this article we will exclusively focus on Box 1.
Box 1 (income from employment and home ownership),
Box 2 (income from substantial interest),
Box 3 (savings and investments).
Income tax brackets and rates
Your income in Box 1 is taxed at different rates based on your earnings. Below is an overview of tax rates for 2024 and the planned changes as of 2025:
2024
| Tax Bracket | Taxable Income | Tax Rate |
| Bracket 1 | Up to €75,518 | 36.97% |
| Bracket 2 | Above €75,518 | 49.50% |
2025 (plan)
| Tax Bracket | Taxable Income | Tax Rate |
| Bracket 1 | Up to €38,441 | 35.82% |
| Bracket 2 | €38,441 to €76,817 | 37.48% |
| Bracket 3 | Above €76,817 | 49.50% |
*These rates apply if you haven’t yet reached the state pension age by 2024.
Income in Box 1 includes wages, freelance income, severance pay, pensions, and internship allowances, among others. If you own a home in the Netherlands, the value of your house and your mortgage interest may also impact your tax.
Understanding your payslip: Dutch payroll system
Your employer handles most of the tax calculations and withholds income tax and social security contributions from your salary. Here is what a sample Dutch payslip may look like:
| Addition | Deductions |
| Gross salary 3,500.00 | Wage tax -900.00 |
| Holiday allowance* (8%) 280.00 | Social security (AOW, Anw, etc.) -320.00 |
| Tax-free reimbursement** (transport) 100.00 | Health insurance premium (Zvw) -160.00 |
| Total taxable income 3,880.00 | Net salary*** 2,500.00 |
Employer contributions
- Pension contribution 200.00
Total employer costs 3,980.00
*Holiday allowance – additionable taxable amount, paid either annually or monthly.
**Tax-free reimbursement - or transport, capped at €0.23 per kilometer.
***Net salary - your take-home pay after all the deductions.
Health insurance and the mandatory healthcare contribution (Zvw)
As an employee in the Netherlands, you must have basic health insurance (basisverzekering), covering essential services such as visits to the GP and medications. You pay a healthcare premium (Zvw), which is automatically withheld from your salary. In 2024, the rates are as follows:
● Employee Zvw contribution: 5.32%
● Employer healthcare premium: 6.57%
Low-income earners may qualify for a healthcare allowance (zorgtoeslag) to help cover these costs. Additionally, certain out-of-pocket medical expenses may be deducted from your income tax.
Tax deductions and credits
The Dutch tax system provides deductions and credits to help reduce your tax burden.
● General tax credit (Algemene heffingskorting): a basic credit for all taxpayers that reduces income tax based on income level.
● Labor tax credit (Arbeidskorting): specific to employees, this credit is designed to make work more financially attractive and varies with income.
● Income-dependent combination tax credit (Inkomensafhankelijke combinatiekorting): For working parents with young children, reducing tax burden if income thresholds are met.
You can also deduct certain health costs, mortgage interest, donations, annuity and travel costs, but you need to file a tax return to claim them.
Annual income tax filing
Your employer handles most of your taxes, but you may still need to file an annual return. This ensures your withheld taxes match your actual tax due and lets you claim extra deductions if you're eligible.
You must file your annual income tax return if:
1. You have additional income (e.g., freelance work).
2. You receive an invitation from the Dutch Tax Office (in a blue envelope).
Even if you’re not invited to do so, filing your annual tax return is often recommended, especially if you haven't worked the full year or recently moved to the Netherlands. First-time filers often use the so-called “M-form,” which is a special form for those who have recently moved to or from the country.
TaxSavers
Navigating Dutch taxes can seem daunting, however knowing the basics of your payslip, tax credits, and health insurance requirements will help you feel confident in managing your finances. By filing a tax return each year, you will ensure that you receive all eligible deductions and refunds if too much tax was withheld. At TaxSavers we can help you make the most out of your financial possibilities, by not only applying and filing the returns, but also guiding your through the process, so you learn how to navigate your taxes.