December 3rd, 2021
Social security is a public system used to support individuals or families in financial difficulties due to certain circumstances. This support is available to individuals who temporarily or permanently do not earn sufficient income to support themselves.
In the Netherlands social security consists of:
– Social services
– Social insurances (national insurances and employee insurances)
The main difference between social services and social insurances is that social services are funded by the government through taxes and that for social insurances a premium must be paid.
In this article we will focus on social insurances and potential discussions with the tax authorities in cross border situations.
There are two types of social insurances schemes in the Netherlands:
– National insurance schemes (mandatory for individuals who work or live permanently in the Netherlands)
– Employee insurance schemes (mandatory for employed individuals in the Netherlands)
Health insurances (ZVW)
Social insurances should not be confused with health insurances. In the Netherlands you are legally obligated to take out a basic health insurance to cover personal medical costs. You are free to choose your health insurance provider and (if so desired) your additional coverage plan.
It is advisable to review your coverage plan and premium at the end of each year as it can be financially beneficial to occasionally switch between health insurance providers.
National insurance schemes (volksverzekeringen)
– Anw (National Survivor Benefits Act): Benefit payments for widows/widowers and dependant children
– AOW (General Old Age Pensions Act): Minimum mandatory government pension for people who have reached the state pension age.
– Wlz (Long-term Care Act): Financial support for people who require intensive care such as people with a chronical illness, a disability or frail elderly
– AKW (General Child Benefit Act): A social benefit intended for the maintenance costs of children. Adults who are in school, unemployed or incapacitated for work are entitled to this benefit.
The contributions for the national insurances in the Netherlands are collected by the Dutch tax authorities. If you are employed in the Netherlands your employer will withhold these contributions from your salary and pay these to the Dutch tax authorities. Self-employed individuals pay these contributions through their personal income taxes.
Employee insurance schemes (werknemersverzekeringen)
– WW (Unemployment Insurance Act): Benefit payments for people who are unemployed.
– WIA (Work and Income (Capacity for Work) Act): Benefit payments for people who are fully or partially incapacitated for work.
– ZW (Sickness Benefit Act): Benefit payments for (former) employees who have fallen ill and who are no longer receiving full salary payments from their employer.
– WAO (Invalidity Insurance Act): Comparable to the WIA, the WAO insures benefit payments to people who have become fully or partially incapacitated for work.
When an employee is unable to work due to illness, incapacity to work or unemployment the employee insurance schemes insure employees of a temporary income.
Employers pay contributions on behalf of their employees to the Dutch tax authorities. These contributions do not apply to self-employed individuals.
Contributions for national insurance and employee insurance (2021)
– The contribution amount for the national insurance schemes is calculated based on your personal income in box 1, the annual applicable rates and your age. The maximum amount is € 9,713 (2021)
– The contribution amount for the employee insurance schemes depends on your personal situation. Your employer is obligated to withhold premiums on a maximum salary of € 58,311 (2021). No premiums are due over your salary above that maximum.
Cross border situations for social insurances
If your employer is located outside of the Netherlands and you are (temporarily) working from the Netherlands as an expat, what does that mean for your social insurances? Are you now insured in the Netherlands, both countries or are you not insured at all?
Luckily, there are bilateral and multilateral treaties in place to prevent double insurance of no insurance at all.
An individual can only be insured for social insurances in one member state.
The (EG) nr. 883/2004 Directive is the most important multilateral treaty when it comes to social security. It is only applicable to EU, EER and Swiss residents and trumps the bilateral social security treaties between member states and even national law.
Almost every (EU) work-related situation is covered under the Directive. Few examples:
– individuals working in a member state are generally covered for social insurances in that state
– civil servants are generally covered in the member state where they work
– individuals working on an aircraft are generally covered by the member state where their home base is located
– individuals working on a ship are generally covered by the member state under whose flag the ship sails
Working from home due to the Covid-19 pandemic in general has no effect on how the above mentioned rules are applied. Meaning that if you were physically working in the Netherlands before the pandemic and are now working from home in another country, you are in principle still covered for social insurances in the Netherlands.
In international situations the bilateral treaty regarding social security between member states is leading. In some treaties clear rules are formulated, but this is unfortunately not always the case.
Though most of the before mentioned rules seem pretty straightforward, in practice they can often lead to discussions because, which rule applies if you are only temporarily working in a member state? Or were working in two or more member states? When are you considered as a civil servant under the Directive? What constitutes as a person’s home base?
As our firm specializes in expat advisory services we regularly come across situations with clients where they have not been informed about social insurances in the Netherlands before relocating. Trying to figure your situation out afterwards can lead to lengthy discussions with the tax authorities and sometimes even with your employer.
It is therefore advised to always contact a Dutch tax lawyer before you relocate to the Netherlands. Feel free to contact us for an introductory meeting to discuss your situation.