Payroll Tax (Loonbelasting) Explained

Key Takeaways

Payroll tax (loonbelasting) is income tax withheld at source by your employer each month — it is an advance payment on your annual income tax.
The term loonheffing on your payslip combines payroll tax and national insurance premiums (AOW, Anw, Wlz) in one deduction.
Your employer calculates the withholding using official wage tax tables (loonbelastingtabellen) published by the Belastingdienst.
At year-end, when you file your income tax return, the Belastingdienst compares what was withheld to what you actually owe — the difference is either a refund or an additional payment.
The loonheffingskorting (payroll tax credit) determines whether tax credits are applied monthly by your employer.

What Is Loonbelasting?

Loonbelasting (wage tax) is a pay-as-you-earn system. Instead of paying all your income tax in one lump sum at year-end, your employer withholds an estimated amount each month and sends it directly to the Belastingdienst.

This system serves two purposes:

For the government: It ensures a steady flow of tax revenue throughout the year
For employees: It spreads the tax burden evenly, so you do not face a large bill in April

Loonbelasting vs Loonheffing

These terms are related but not identical:

Term	What It Means
Loonbelasting	Income tax on wages only
Premies volksverzekeringen	National insurance premiums (AOW, Anw, Wlz)
Loonheffing	Loonbelasting + premies volksverzekeringen combined

On your payslip, you will almost always see loonheffing as a single line — because the income tax and national insurance premiums are calculated together and withheld as one amount.

Good to know

The premies volksverzekeringen are technically not a tax — they are insurance premiums. But because they are calculated and collected together with income tax, they feel indistinguishable from tax on your payslip. Combined, they make up the 36.97% first-bracket rate.

How Your Employer Calculates Loonheffing

Each month, your employer follows these steps:

Step 1: Determine Your Taxable Wage

Starting from your gross salary, subtract pre-tax deductions:

Pension contribution (employee share)
Other pre-tax items (if any)

The result is your fiscaal loon (taxable wage) for the month.

Step 2: Look Up the Wage Tax Tables

The Belastingdienst publishes official wage tax tables (loonbelastingtabellen) each year. There are different tables for:

White tables (witte tabel): For regular employees
Green tables (groene tabel): For recipients of social benefits, pensions, or annuities
With or without loonheffingskorting applied
Monthly, weekly, or four-weekly payment periods

Your employer uses the table that matches your situation. The table provides the exact loonheffing amount for each level of taxable wage.

Step 3: Apply the Loonheffingskorting (If Applicable)

If you ticked "yes" on the loonheffingskorting form, the wage tax table your employer uses already incorporates the monthly tax credits. This reduces the withholding amount.

The monthly credits are approximately:

Credit	Annual Maximum	Monthly Equivalent
General tax credit (algemene heffingskorting)	€3,362	~€280
Labour tax credit (arbeidskorting)	€5,532	~€461
Total	€8,894	~€741

These credits phase out at higher incomes, so the actual monthly benefit decreases as your salary rises.

Step 4: Withhold and Remit

Your employer deducts the calculated loonheffing from your salary and sends it to the Belastingdienst. This happens monthly for most employers (quarterly for very small employers).

The Annual Settlement

Loonheffing is an estimate. It assumes your monthly income will stay the same all year and that you have no other income, deductions, or special circumstances. In reality:

You may have changed jobs mid-year
You may have received a bonus or one-time payment
You may have mortgage interest to deduct
You may have additional income (freelance work, rental income)
You may have Box 3 assets to declare

When you file your annual income tax return (aangifte inkomstenbelasting), the Belastingdienst calculates your actual tax liability and compares it to the total loonheffing withheld during the year.

Scenario	Result
Withheld > actual tax owed	You receive a refund (teruggaaf)
Withheld < actual tax owed	You owe an additional payment (bijbetaling)
Withheld = actual tax owed	No payment either way

Tip

Common reasons for a refund: you arrived mid-year (lower annual income than assumed), you have a mortgage (interest deduction), or you made charitable donations. Common reasons for owing extra: you had income from two employers simultaneously, you have Box 3 assets, or you did not apply the loonheffingskorting correctly.

Special Situations

Bijzonder Tarief (Special Rate)

When your employer pays you a one-off amount — such as a bonus, severance, or 13th month — it is taxed at a special rate (bijzonder tarief) instead of the regular wage tax table.

The special rate is calculated based on your annual income level and is typically higher than your regular monthly rate. This prevents the bonus from being under-taxed in the month it is paid.

If the special rate results in over-withholding (which is common), the excess will be refunded when you file your annual tax return.

The 30% Ruling and Payroll Tax

If you have the 30% ruling, your employer adjusts the payroll tax calculation:

Your gross salary is split: 70% taxable, 30% tax-free allowance (or 80/20, 90/10 under the reduction schedule)
Loonheffing is calculated only on the taxable portion
The tax-free portion is paid as an untaxed allowance

This significantly reduces monthly withholding and increases your net pay.

Two Employers

If you have two jobs simultaneously:

Primary employer (where you applied loonheffingskorting): Withholds tax using the table with credits
Secondary employer (no loonheffingskorting): Withholds tax using the table without credits — resulting in higher withholding

Even with correct withholding at both employers, the combined income may push you into a higher bracket. Your annual tax return will calculate the exact amount owed.

Starting or Ending Employment Mid-Month

If you start or leave a job partway through a month, your employer calculates loonheffing proportionally. However, the annualized assumptions may be off, which is corrected in your annual return.

The Loonheffingskorting Decision

When you start a new job, you must tell your employer whether to apply the loonheffingskorting. Here is the decision:

Situation	Apply Loonheffingskorting?
One employer, no other income	Yes — at your employer
Two jobs simultaneously	Yes at your main employer, No at the second
Employed + receiving pension	Yes at one, No at the other
Employed + freelancing	Yes at your employer (freelance income is settled in your tax return)

Warning

If you switch jobs during the year, tell your new employer whether to apply the loonheffingskorting — and make sure your old employer stops applying it. Overlap can cause under-withholding. When in doubt, it is safer to not apply it at the new employer for the remainder of the year and sort it out in your annual return.

Payroll Tax for Non-Residents

If you are a non-resident working in the Netherlands, your employer still withholds loonheffing. However:

The national insurance premiums may not apply if you are insured in another EU country (under EU Regulation 883/2004)
You will receive a reduced payslip showing only the income tax portion
You may need to file a Dutch non-resident tax return (C-form) instead of the regular return

Your employer needs documentation (such as an A1 certificate) to apply the correct withholding.

Common Mistakes

Thinking loonheffing is your final tax — It is an advance payment. Your actual tax may be higher or lower, depending on your full financial picture.
Applying loonheffingskorting at multiple employers — This guarantees you will owe tax at year-end. Only apply it at one employer.
Not filing a tax return because "my employer already paid my tax" — Filing is still required if you have deductions to claim, other income to declare, or assets to report.
Panicking about the special rate on a bonus — The higher withholding rate on bonuses is temporary. If too much was withheld, you get it back when you file your return.
Ignoring the jaaropgaaf — Your employer's annual statement should match the sum of your monthly payslips. If it does not, raise the issue before filing your tax return.