July 5th, 2023
The short answer to that is bonuses are taxed no differently than any other income. There is no special tax rate for bonuses. It’s a common misconception that bonuses are taxed at a different rate than other employment income in the Netherlands. They aren’t. They are simply withheld at a different rate and the difference, if any, is reconciled at the time you file your taxes.
Dutch bonuses are subject to the country’s progressive income tax rates alongside regular income. As usual, the rate is dependent on the total amount of taxable income for the year, and the tax is deducted from the gross amount of the bonus.
How much are bonuses taxed?
The highest possible rate is currently 49.5%. Therefore, you can combine your income (including your bonus) to determine which income tax bracket(s) apply. All bonuses will be taxed at the highest possible tax rate of 49.5%, although in practice this may be slightly higher due to the impact bonuses can have on other exemptions. For example, you may receive tax credits on your regular salary, such as the ‘Loonheffingskorting’ tax credit which is applied based on your total income. Should your bonus push your total income above the threshold where a Loonheffingskorting tax credit can be applied, the authorities will apply a higher amount of tax to compensate. Bonuses may also be subject to social security contributions and other payroll taxes.
Since the application of bonuses makes it hard to predict the final income, employers in the Netherlands will automatically withhold taxes on bonuses at the highest possible rate, which may mean that your bonuses appear significantly reduced on your payslip. However, once your total income is calculated (including bonuses) at the end of the year, any discrepancies will be paid back as a tax refund.
Exemptions?
Some parts of a bonus may be subject to a lower tax rate, known as “lump sum payments” or “fixed or recurring bonuses.” However, this is a complex area of tax law. It’s advisable to consult with a qualified tax professional for the most up to date information on how bonuses are taxed in the Netherlands in 2023.
Tip: Non-monetary bonuses such as company cars, or vacation packages may also be taxed, usually at their fair market value.
