Glossary: Dutch Tax and Salary Terms
Written by Mottalib Radif·MBA INSEAD · Dutch Finance Enthusiast
Navigating the Dutch tax and payroll system can be daunting, especially when official documents, payslips, and tax forms are filled with unfamiliar Dutch terminology. This glossary provides clear English explanations of the most common fiscal, tax, and salary terms you will encounter as an expat, international worker, or anyone dealing with Dutch finances. Use it as a quick reference alongside our gross-to-net salary calculator.
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30%-regeling (30% Ruling)
A tax benefit for highly skilled migrants recruited from abroad. It allows employers to pay 30% of the employee's salary as a tax-free allowance to compensate for extraterritorial costs. The ruling is granted for a maximum of five years and requires meeting specific salary and expertise thresholds.
A
AOW (State Pension)
The Algemene Ouderdomswet (AOW) is the Dutch state pension. Every resident accrues 2% per year of residency between age 15 and the state pension age (currently 67). The AOW premium is included in the first-bracket income tax rate. The pension provides a flat-rate income regardless of your earnings history.
Arbeidskorting (Employment Tax Credit)
A tax credit for people who earn income from employment or self-employment. The amount increases with income up to a maximum and then gradually decreases for higher earners. It is automatically applied through payroll or claimed in your annual tax return.
Algemene heffingskorting (General Tax Credit)
A basic tax credit that every taxpayer receives. The amount decreases as your income rises above a certain threshold and phases out entirely at higher incomes. It is applied automatically through payroll tax and settled in the annual tax return.
Alimentatie (Alimony)
Maintenance payments to a former spouse following a divorce. Alimony payments are tax-deductible for the payer in Box 1 and must be declared as income by the recipient. Child support (kinderalimentatie) is not deductible.
Anw (Survivors Act)
The Algemene nabestaandenwet provides a benefit to surviving partners and orphans after the death of an insured person. The Anw premium is part of the national insurance contributions deducted from your gross salary.
B
Belastingschijf (Tax Bracket)
The Dutch income tax system uses progressive brackets in Box 1. Your income is taxed at increasing rates as it moves into higher brackets. The first bracket includes both income tax and national insurance premiums.
Bijdrage Zvw (Healthcare Insurance Contribution)
A mandatory contribution toward the Healthcare Insurance Act (Zorgverzekeringswet). For employees, the employer pays this contribution on top of the gross salary. For self-employed individuals, it is calculated and paid through the annual tax return.
Bijtelling (Company Car Addition)
If your employer provides a company car for private use, a percentage of the car's catalogue value is added to your taxable income. The standard rate is 22%, with a lower rate of 16% for fully electric vehicles. You can avoid the addition by driving fewer than 500 private kilometres per year.
Box 1 (Income from Work and Home)
The first of three tax categories in the Dutch system. Box 1 covers employment income, business profits, pension, social benefits, and the deemed rental value of your own home minus mortgage interest. It is taxed at progressive rates.
Box 2 (Income from Substantial Interest)
The second tax category, applicable if you hold 5% or more of the shares in a Dutch company (BV). Dividends and capital gains from such holdings are taxed at specific rates (24.5% up to a threshold, 33% above).
Box 3 (Income from Savings and Investments)
The third tax category that taxes wealth above a tax-free threshold. The Belastingdienst calculates a deemed return based on the composition of your assets (savings, investments, debts) and taxes it at a flat rate of 36%. There is a per-person tax-free allowance.
Bruto salaris (Gross Salary)
Your total salary before any deductions for income tax, social insurance contributions, pension premiums, and other withholdings. This is the amount stated in your employment contract and used as the basis for calculating your net pay.
BTW (VAT / Value Added Tax)
Belasting over de Toegevoegde Waarde is the Dutch value-added tax. The standard rate is 21%, with a reduced rate of 9% on essential goods such as food, books, and medications. Businesses charge BTW on sales and can reclaim BTW paid on business purchases.
E
Effectief belastingtarief (Effective Tax Rate)
The actual percentage of your total income that you pay in taxes after accounting for all brackets, credits, and deductions. It is always lower than your marginal tax rate because only the portion of income in each bracket is taxed at that bracket's rate.
Eigenwoningforfait (Deemed Rental Value)
A percentage of your home's WOZ value that is added to your taxable income in Box 1 as imputed rental income. The percentage varies with the WOZ value of the property. This amount is typically offset by the mortgage interest deduction for homeowners with a mortgage.
H
Heffingskorting (Tax Credit)
A general term for tax credits that reduce your total tax liability. The two main credits are the algemene heffingskorting (general tax credit) and the arbeidskorting (employment tax credit). Other credits include the IACK for working parents and elderly credits.
Huurtoeslag (Housing Allowance)
A government subsidy for renters with a low income and rent below a maximum threshold. The allowance is income-dependent and paid monthly by the Belastingdienst/Toeslagen. You must apply through the toeslagen.nl portal.
Hypotheekrenteaftrek (Mortgage Interest Deduction)
The ability to deduct mortgage interest payments from your Box 1 taxable income. This is one of the most significant tax benefits for homeowners in the Netherlands. It applies to mortgages on your primary residence (eigen woning) and requires an annuity or linear repayment scheme for mortgages taken out after 2013.
I
Inkomstenbelasting (Income Tax)
The annual income tax levied on individuals. It encompasses all three boxes: work and home income (Box 1), substantial interest (Box 2), and savings and investments (Box 3). The annual tax return (aangifte inkomstenbelasting) settles the difference between tax already withheld and the actual amount due.
IACK (Income-Dependent Combination Credit)
The Inkomensafhankelijke combinatiekorting is a tax credit for working parents with a child under 12. The lowest-earning partner (or a single parent) qualifies if they earn above a minimum threshold. The credit increases with income up to a maximum amount.
J
Jaarruimte (Annual Margin for Pension)
The amount you can contribute to a supplementary pension product (such as a lijfrente or banksparen) in a given year, with tax deduction. It is calculated based on your income and existing pension accrual. Unused jaarruimte from the past seven years can be used as reserveringsruimte.
K
Kinderbijslag (Child Benefit)
A quarterly government payment for parents raising children up to age 18. The amount depends on the child's age and is not income-dependent. It is administered by the SVB (Sociale Verzekeringsbank) and paid automatically after registration.
Kinderopvangtoeslag (Childcare Allowance)
A government subsidy that covers a portion of childcare costs for working parents. Both parents must be working, studying, or following an integration course. The allowance is income-dependent and covers registered daycare (kinderdagverblijf), after-school care (BSO), and host-parent care (gastouderopvang).
Kindgebonden budget (Child-Related Budget)
An income-dependent supplement for families with children up to age 18. It is paid by the Belastingdienst/Toeslagen on top of the kinderbijslag. The amount depends on household income, number of children, and the age of the children.
L
Loonbelasting (Wage Tax)
The tax withheld from your salary by your employer before you receive your net pay. It is a prepayment of income tax (inkomstenbelasting). The amount withheld is settled against your actual tax liability when you file your annual tax return.
Loonheffing (Payroll Tax)
The combined amount of wage tax (loonbelasting) and national insurance premiums (premies volksverzekeringen) withheld from your gross salary each month. Your employer calculates and remits this to the Belastingdienst on your behalf.
Loonstrook (Payslip)
The monthly document from your employer that details your gross salary, deductions (tax, social insurance, pension), and net salary. It is essential for verifying your payroll tax credits and for completing your annual tax return.
M
Minimumloon (Minimum Wage)
The statutory minimum wage set by the Dutch government, adjusted twice a year (January and July). It applies to employees aged 21 and over. Younger workers receive a percentage of the adult minimum wage. The minimum wage is expressed as a gross hourly rate.
MKB-winstvrijstelling (SME Profit Exemption)
A tax exemption for small and medium-sized enterprises (MKB). A percentage of the taxable profit (after applying the zelfstandigenaftrek and other deductions) is exempt from income tax. This effectively reduces the tax rate for self-employed entrepreneurs.
Motorrijtuigenbelasting (Vehicle Tax)
A periodic tax on motor vehicles based on weight, fuel type, and province of registration. Fully electric vehicles are currently exempt. The tax is paid quarterly or monthly directly to the Belastingdienst.
N
Netto salaris (Net Salary)
Your take-home pay after all deductions from your gross salary, including wage tax, national insurance premiums, pension contributions, and any other withholdings. This is the amount that lands in your bank account each month.
P
Premies volksverzekeringen (National Insurance Contributions)
Mandatory contributions for national insurance schemes: AOW (state pension), Anw (survivors benefit), and Wlz (long-term care). These premiums are included in the first-bracket income tax rate and are only paid on income up to the end of the first bracket.
Pensioenopbouw (Pension Accrual)
The building up of occupational pension rights through contributions made by both employee and employer to a pension fund. The contribution is deducted from your gross salary before tax (fiscally advantaged). Most Dutch employees are automatically enrolled in their industry or company pension scheme.
S
Studiefinanciering (Student Finance)
Financial support from the Dutch government (DUO) for students in higher education. It includes a loan component, a supplementary grant (aanvullende beurs) for lower-income families, and the student travel product (studentenreisproduct). The basic grant was reintroduced in 2023.
T
Toeslagen (Allowances/Benefits)
Income-dependent government subsidies administered by the Belastingdienst/Toeslagen. The four main toeslagen are: zorgtoeslag (healthcare), huurtoeslag (housing), kinderopvangtoeslag (childcare), and kindgebonden budget (child-related). Eligibility depends on income, assets, and household composition.
V
Vakantiegeld (Holiday Allowance)
A statutory holiday allowance equal to 8% of your gross annual salary, typically paid as a lump sum in May or June. It accrues monthly and is legally required for all employees. Some employers offer the option to receive it spread across monthly payments instead.
Vermogensbelasting / Box 3 (Wealth Tax)
The taxation of wealth through Box 3 of the income tax system. Savings, investments, and other assets above a tax-free threshold are subject to a deemed return, which is then taxed at 36%. Real estate (other than your primary home), stocks, bonds, and cash savings all count toward Box 3.
Volksverzekeringen (National Insurance)
The collective term for social insurance schemes that cover all residents: AOW (state pension), Anw (survivors), and Wlz (long-term care). Premiums are paid through payroll tax and are included in the first-bracket income tax rate. Coverage is based on residency, not employment.
W
Werkgeverslasten (Employer Costs)
The total cost an employer pays on top of the gross salary, including employer social insurance contributions, pension contributions, holiday allowance accrual, and the ZVW contribution. These costs typically add 20-30% to the gross salary.
Werknemersverzekeringen (Employee Insurance)
Social insurance schemes for employees, funded by employer premiums: WW (unemployment), WIA (disability), and ZW (sickness). Unlike volksverzekeringen, these are tied to employment rather than residency. The premiums are paid entirely by the employer.
Wlz (Long-Term Care Act)
The Wet langdurige zorg covers the costs of long-term care for people with chronic illness or disability who need permanent supervision or 24-hour care. The Wlz premium is part of the national insurance contributions included in the first-bracket income tax rate.
WW (Unemployment Insurance)
The Werkloosheidswet provides a temporary income for employees who become involuntarily unemployed. The duration depends on your employment history (up to 24 months). WW premiums are paid by the employer as part of the werknemersverzekeringen.
WIA (Work and Income According to Capacity)
The Wet werk en inkomen naar arbeidsvermogen provides income for employees who become partially or fully disabled for work after two years of illness. The benefit amount depends on the degree of disability and prior earnings. WIA premiums are paid by the employer.
Z
Zelfstandigenaftrek (Self-Employment Deduction)
A tax deduction available to self-employed individuals (ZZP'ers) who meet the hours criterion of at least 1,225 hours per year. The deduction amount is being gradually reduced each year and will continue to decrease in the coming years.
Zorgtoeslag (Healthcare Allowance)
A monthly government subsidy to help lower-income residents pay for mandatory health insurance. The amount depends on your income and that of your fiscal partner. It is administered by the Belastingdienst/Toeslagen and must be applied for through toeslagen.nl.
ZVW (Healthcare Insurance Act)
The Zorgverzekeringswet mandates that every Dutch resident must have basic health insurance (basisverzekering). The system combines a nominal premium paid directly to your insurer with an income-dependent contribution (bijdrage ZVW) paid through payroll or the tax return.
ZZP (Freelancer / Self-Employed)
Zelfstandige zonder personeel literally means "self-employed without staff." ZZP'ers are independent contractors or freelancers who work for clients without being employed. They must arrange their own pension, disability insurance, and pay income tax and ZVW contributions through the annual tax return.
Written byMottalib Radif
MBA INSEAD · Dutch Finance Enthusiast
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Calculate Your Net SalarySources: Belastingdienst, Government.nl, Rijksoverheid. Updated for 2026.