BES-employers not required to withhold wage tax on minimum wages
BES-employers not required to withhold wage tax on minimum wages
July 31, 2024
The Dutch Secretary of Finance has provided a temporary exemption from withholding wage tax for employees earning the minimum wage in the Caribbean Netherlands (hereinafter: “BES islands”). This decision aims to ensure that the increase in the minimum wage as per July 1st 2024 does not inadvertently result in a tax burden for these employees.
Background
Application of the wage tax tables implies a recalculation of the increased wage to an annual basis. Because the minimum wage on the BES islands has increased on July 1st 2024, this could result in wage tax being due. However, because the tax-free allowance (in Dutch: “belastingvrije som”) is equal to the minimum wage, no wage tax should de facto be due.
Approval Conditions
Employers can opt not to withhold wage tax for employees under the following conditions:
- The employee’s agreed hourly wage is the minimum wage of $10.10 (in 2024).
- The employee works a maximum of 40 hours per week or the equivalent based on the applicable wage period.
- The employee is entitled to the tax-free allowance.
This exemption applies only to the withholding of wage tax and not to the overall income tax liability. Employees who meet these conditions but regardless have paid wage tax can request a refund from the tax inspector. The decision is effective as of July 1, 2024, and will expire on January 1, 2025.
HBN Law & Tax would be happy to advise you on the above. If you have any questions about this or would like assistance with the application for a tax refund, please contact Mr. Maarten Tervoort.
