Split Payroll

If your employee works in several countries, you may be able to take advantage of the low (progressive) rates in different countries: the split payroll. This benefit through the salary split (also known as salary split) can amount to thousands of euros per year.

It is true that sometimes it is interesting and indeed leads to a net benefit to “set up” a salary split. However, this is not always the case. Moreover, in practice, there is also a lot of regulation and quite a bit of administration involved, in several countries. So it is important to weigh up the costs against the benefit to be gained.

When to apply?

If an employee works in several countries, the salary earned in the other country may have to be taxed according to the rules applicable there. Because the other country applies a tax-free allowance and a progressive rate in most cases, the employee working internationally may benefit.

An employee’s net income can go up without increasing the labour costs for the employer.

The main wage and income tax rules stipulate that an employee pays tax on his activities in the country where he works. When working in multiple countries, tax liability in multiple countries may therefore arise (barring exceptions such as the 183-day rule).

This is also at the heart of the salary split: a situation where tax is paid on an employee’s salary in several countries. A salary split is about taxes, not social security!

Each salary split is tailor-made and depends on any tax treaty between the countries.

If a tax treaty between countries applies, the country of residence is allowed to tax the employee’s employment income.

The exceptions where the country of work may tax (part of) the labour income are:

  • an employer established in the country of work, or:
  • that the employee works for a permanent establishment that his employer has in the country, or:
  • when the employee stays there for more than 183 days in a year. This year can be a tax year, a calendar year or a 12-month period. This depends on what is stated in the tax treaty.

Often, the OECD model treaty applies, but sometimes it can differ greatly from it. Each salary split for an employee working internationally must be individually assessed against the applicable treaties.

If no tax treaty applies, the Dutch employer may not stop withholding and remitting tax on the employee’s salary unless it can be proved that the salary earned abroad is subject to a foreign tax. An example of proof of this is a confirmation from the foreign tax authority.

Split taxable income between countries

By splitting income for tax purposes (this can also be done by contract) between different countries, each part will be taxed separately. If the internationally employed employee is fully taxed in his home country, a higher tax bracket often applies. By splitting income for tax purposes, more favourable tax rates are often calculated. 


A Dutch resident has a contract with an international concern with a branch in the Netherlands (A). 2 days a week he works at a branch in B of the same international concern. The salary split can be applied.
His annual salary is €100,000.00. The A branch passes on 40% of the salary costs to the B branch.

In A, tax is levied on the annual salary. This amounts to about €40,000. The employee receives an exemption for the salary subject to B taxes. This exemption is granted at the average rate and amounts to €16,000 (40/100 * €40,000).

In B, there is a tax-free base and a progressive rate. On the amount of €40,000, €9,000 in tax is therefore withheld. The difference between the exemption and the tax deduction in B is €7,000 (net benefit for the employee).

Nb. These amounts are indicative and may differ in reality.

Besides a division of taxation, the salary split may also have implications in terms of social security, labour law and pension accrual.

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