Social Security and Taxes

fSocial security
The Netherlands has a fairly typical European Social Security system: i.e. it is expensive to run, but offers good benefits to those in need.

The first Dutch social legislation dates from 1800. This was only a minor law that set down rules for employing young people and women, but it was the first in what would become the world's most extensive and generous body of social legislation. Today however, the social system is under extreme pressure because it has become too expensive to run. In recent years it has undergone radical reform to prevent abuse and reduce sick leave. Nevertheless, the current system is still regarded as one of Dutch society's finest achievements.

The main principle underpinning the Dutch social system is that everyone should be able to play an equally active role in society. Some people need help in doing so: the old and disabled, families on low incomes, young people without qualifications, ethnic and other minorities, the homeless, and drug addicts.

In some cases it is possible for expats to opt-out of paying for social security in the Netherlands. Form E101 or certificate of coverage should be obtained before departure.

In general, the following conditions apply:

• The employee must be covered by social insurance legislation in their country of origin immediately prior to their secondment.
• The employee must be a national of a country that has a treaty with the Netherlands. This includes: the EU, Switzerland, Norway, Australia, Canada, Chile, Israel, Morocco, Turkey, US and S. Korea, Liechtenstein, Iceland, Bosnia, Macedonia, Cape Verde, Croatia, Malta, New Zealand and Serbia.
• The employee must have an employment contract with the seconding employer (i.e. the employer in the host country).
• The employer in the country of origin remains liable for all costs related to the secondment. This means, among other things, that the employer must arrange for payment of social insurance contributions in the country of origin.
• The secondment may not last more than 12 months. In some cases this can be extended.
• The purpose of the secondment must not be to replace another seconded employee.
• The employer must carry out ‘substantial activities' in the home country.

If you do not have an E101 or certificate of coverage you will be insured in the Netherlands. This means the following social security items.

• AOW (national old age pension)
• ANW (national survivor's benefit)
• AWBZ (public insurance of extraordinary costs of sickness)
• AKW (child benefit)
• WIA (Disability Act)
• WW (Unemployment Act)

The premiums for AOW, ANW, AWBZ and AKW are included in the first 2 income tax brackets. The WIA premium is paid by the employer. The WW premium is paid partially by the employer and partially by the employee.

More information:
http://www.svb.nl/internet/uk/index.jsp The SVB provides brochures on social security in several foreign languages.

Insurance
The type and amount of insurance you need to purchase is largely a personal decision. The following main types of insurance are available:

• Health insurance (mandatory)
• Vehicle insurance (mandatory for those with a vehicle)
• Personal (third party) insurance
• House (bricks and mortar) insurance
• House contents insurance
• Legal costs insurance

Health insurance
All adults living in the Netherlands and paying income tax (loonbelasting) here are legally obliged to take out at least basic cover. Every adult must therefore have their own policy, and will have to pay for it. Children (under 18 years) receive the basic cover free of charge. They need not have their own policy, but must be named on the policy of one of their parents. They will receive the same optional cover as that parent.

Types of policy
There are two types of policy:

• The "standard policy" (naturapolis) - bills are paid directly to the healthcare provider by the insurer, and the insurer can select the healthcare provider.
• The "refund policy" (restitutiepolis) - the bill must first be paid by the customer and claimed back from the insurer, but (within limits) the patient may choose where care is received.

The type of policy will affect the premium - the refund type is more expensive.

The following things are included under the basic cover:

• Medical care (including your local doctor and medical specialists)
• Hospital costs
• Limited dental care (only surgical dental care for adults)
• Equipment
• Pregnancy care
• Ambulance transport

There are restrictions. Exceptions that are not covered include:

• Flu vaccinations
• Basic dental care (children are covered)
• Extended physiotherapy

Own-risk
Everyone can choose to carry part of the costs of healthcare themselves (yearly subscriptions charged by local doctors do not count as costs in this case).

No-claim bonus
The no-claim system applies to all adults. Those who make no claim during the year receive the maximum no-claim bonus of €255 back from their health insurance supplier. If claims total less than €255 in the year then the insurer will pay the difference between the claim and €255. The costs of consultations with your local doctor, pregnancy care and midwifery do not reduce the amount of no-claim bonus you will receive.

You are exempted from mandatory Dutch health insurance if you can provide an E106 or European Health Insurance Card (EHIC). With a treaty policy you are insured up to the level of Dutch basic coverage. Check with you HR manager.

Medical insurance ‘to do' list
Check your health insurance cover.
Check with you HR manager for possible collective insurances.

More information on the healthcare insurance system
The system described above is a "new" healthcare insurance system that was introduced as of 2006. Up to date information can be found at the Ministry website: http://www.minvws.nl/en/

Other insurance
Vehicle insurance
Third-party insurance is a legal requirement for vehicle use in the Netherlands. Fully comprehensive insurance cover and variants between the two extremes can also be purchased. Note that insurance in the Netherlands is on the car not the driver. Once the vehicle is insured, anyone who meets the specifications of the policy in terms of age, etc. is insured to use it. Conversely, the driver may therefore NOT be covered to use other vehicles.

Personal insurance
Although not a legal requirement, many people in the Netherlands have personal third party insurance. This covers circumstances where you or your family may accidentally injure a third party or damage their property, e.g. if a tree falls in your garden and damages a neighbour's house.

House (bricks and mortar) insurance
Building insurance is usually paid by the owners of furnished rented properties (confirm this with the owner), but tenants will still need contents insurance for their personal possessions.

House contents insurance
This covers personal possessions inside the house. Even in furnished accommodation it is normal to take extra insurance for unusual items. Check your insurance policy for details of what is covered.

Legal costs insurance
In the case of litigation, this insurance covers legal fees and provides legal support when needed.

Taxation
The Netherlands is a relatively high taxation country. Foreigners however, often qualify for an advantageous income tax regulation called the ‘30% ruling', whereby the first 30% of their income is entirely free of taxes. Consult your HR Manager for more information.

Everyone living in the Netherlands here needs a Social-Fiscal (SOFI) number. This will be renamed the Citizen Service Number ("Burger Service Nummer" or BSN) in 2006. As from July 2006 you will need to obtain this before you can start work here.

Everyone must be registered at their Town Hall, and the head of the household (if a non-EU citizen) must be able to show that he/she may legally work here before they receive their SOFI number.

The main taxes are:

• Wage withholding tax
• Income tax
• Value Added Tax (BTW)
• Road tax
• Vehicle purchase tax (BPM)
• Local taxes
• Home owners tax
• Nursery and childcare tax issues

More information and useful links
The official website of the Ministry of Finances provides all relevant information in English:
http://www.minfin.nl.