A company deciding to place a team in Europe, whether to open a market, be closer to customers, or access talent, faces a sequence of problems that are easy to underestimate because none of them is the actual reason for the move. The commercial case is clear. What follows is the machinery: an entity to employ people, permits to let them work, a payroll to pay them, and a social security position that is correct. Get the sequence wrong and the team arrives before it can legally be employed.
You need an entity before you need people
In almost all cases, employing people in a European country requires a local employing entity. A company cannot simply place staff in another country and run them from abroad indefinitely; doing so creates a taxable presence, as we set out in our note on permanent establishment, and leaves the employment on an uncertain footing. The entity is the foundation, and establishing it, with the substance and banking a real operation needs, is the first step, not an afterthought once the team is chosen.
The requirement is not formal. Dutch wage tax is collected by withholding, and the obligation sits on the withholding agent, who under article 27 of the Wage Tax Act 1964 must withhold at the moment the salary is enjoyed, apply the wage tax table in force for that employee at that moment, and remit what has been withheld on a return for the period. Article 6 of the same act then decides who can be that agent. A person who does not live or is not established in the Netherlands is a withholding agent only to the extent that he has a permanent establishment there, or a permanent representative living or established there, or else employs people whose pay is subject to income tax, keeps the payroll records for those people in the Netherlands and has notified the inspector that he is their withholding agent. Those are the two doors, and the provision opens no third.
Three questions, three different tests
Most of the trouble in these projects comes from treating the move as one decision. It is three. Whether a person may work in the country at all is an immigration question. Which social security system they belong to, and therefore who collects contributions from the payroll, is a coordination question. Where the person is taxed on that salary is a tax question. Each has its own test, its own competent authority and its own evidence, and the three can point at different countries for the same employee in the same month without anything having gone wrong.
The two remaining layers then answer to tests with nothing in common. For social security, Regulation (EC) No 883/2004 begins from the rule that a person is subject to the legislation of a single Member State only, and its general rule, expressly made subject to the special rules that follow it, attaches a person pursuing an activity as an employed person in a Member State to the legislation of that State. For Dutch tax, article 4 of the General State Taxes Act sets the test in a line: where a person resides is assessed according to the circumstances. One rule looks at where the work is performed, the other at the centre of a life, and there is no reason the two should land in the same country.
Immigration is the long pole
For team members who are not already entitled to work in the destination country, immigration is usually the longest lead time in the whole project. Work and residence permits, the categories available, the salary thresholds, the processing times, all of these govern when the team can actually start, and they cannot be compressed at the end. A company that leaves immigration until the entity is set up and the offers are made discovers that the binding constraint was the one it addressed last.
In the Netherlands the arithmetic is visible rather than hidden. For a highly skilled migrant the permit is applied for by the employer, and only an employer recognised by the Immigration and Naturalisation Service can apply for it. Recognition is itself an application, with its own decision period of ninety days that can be extended where the file is incomplete or further investigation is needed, and its own fee, EUR 5,080 in 2026, or EUR 2,539 for a business with no more than fifty persons, on a schedule that is reset every first of January. Only once recognition has been granted and the organisation appears in the public register does the permit itself become the quick step: the service aims to decide a recognised sponsor’s application within two weeks, or within seven weeks in cases such as those where a work permit is also required.
The commercial decision to move is made in a meeting. The date the team can actually start is decided by an immigration office, and that date is rarely the one anyone assumed.
What the salary thresholds actually say
Salary thresholds are the part of the plan most often quoted from memory, and the part that changes every year. For 2026 the service sets the required gross amount per month for a highly skilled migrant of thirty years or older at EUR 5,942, for one under thirty at EUR 4,357, and at EUR 3,122 under the reduced salary criterion, which the service applies in three defined cases built around the residence permit for an orientation year for highly educated persons, two of them subject to a three year window running from graduation, from the doctoral defence or from the expiry of a research permit. The European Blue Card figure is EUR 5,942, with EUR 4,754 under its own reduced criterion for graduates of a higher education programme. The amounts change on 1 January each year, the one that governs is the one applying on the date of the application, and on a change of employer it is the one applying on the date the new employment contract commences.
Payroll and social security
Once employed locally, the team has to be paid locally, with local withholding and local social contributions, and the transition from a home-country arrangement to a local one has to be handled cleanly. Where people are moving rather than being hired fresh, the posted worker and social security rules determine what applies during the transition, as we set out in our note on posting workers and running payroll across Europe. Getting the social security position right, and evidenced, avoids a later claim for contributions the company thought it had covered.
The rules that decide that position are short and unforgiving. Article 12 of Regulation 883/2004 keeps a posted employee in the sending State’s system provided the anticipated duration of the work does not exceed twenty four months and the employee is not sent to replace another posted person. Article 13 governs the employee who normally works in two or more Member States: the State of residence takes the case if a substantial part of the activity is pursued there, and if it does not, the article runs through four further rules keyed to how many employers there are and where they have their registered office or place of business. The implementing Regulation (EC) No 987/2009 adds that a substantial part need not be the major part, and that a share below twenty five per cent of working time or remuneration is an indicator that the part pursued there is not substantial. Where the result does not suit the person concerned, article 16 lets two or more Member States, or the bodies they designate, provide for an exception by common agreement in the interest of particular persons or categories of persons.
The position then has to be evidenced, and the evidence is a document rather than an assertion. Article 19 of the implementing regulation obliges the competent institution, at the request of the employee or the employer, to issue an attestation that its legislation applies and to state until what date and on what conditions it does so. In the Netherlands that attestation, the A1 or certificate of coverage, is issued free of charge by the Sociale Verzekeringsbank, applied for online through its employer portal with level three eRecognition, a route open only to companies established in the Netherlands, with a paper application for everyone else. That the document can hold up a start date is taken for granted by the bank’s own guidance, which notes that where the certificate has not yet arrived and the employee may therefore not begin work, the controlling authorities in most countries also accept a copy of the application, and offers to handle the request urgently where they do not. For the employee who will work in two or more Member States the first move is different again: the institution in the State of residence must be informed, it determines the applicable legislation provisionally, and that provisional determination becomes definitive two months later unless one of the institutions concerned objects within the period.
Two further points are worth holding apart. Beyond the European Union, the European Economic Area and Switzerland there is no coordination regulation, only the countries with which the Netherlands has an agreement on work and social security, and that list is published and finite: for a country not on it there is simply no instrument to point to, and each system applies its own law to the same salary. And posting engages a second body of rules with a clock of its own. Directive (EU) 2018/957, amending the 1996 directive, requires the host State’s terms on nine listed matters to be guaranteed to a posted worker on the basis of equality of treatment, among them remuneration including overtime rates, which replaced the older reference to minimum rates of pay, accommodation provided by the employer away from the regular place of work, and allowances for travel, board and lodging. Once the effective duration of a posting exceeds twelve months, all the host State’s applicable terms apply, except the procedures, formalities and conditions of concluding and terminating the contract including non competition clauses, and supplementary occupational retirement pension schemes. The period extends to eighteen months where the service provider submits a motivated notification, and replacing one posted worker with another on the same task at the same place does not restart the count, because the periods are added together. Twelve months for employment terms and twenty four for contributions are two different clocks, and a project that plans against one of them is caught by the other.
The 30 per cent ruling and making relocation attractive
The Netherlands offers a favourable regime for qualifying incoming employees that can make relocation materially more attractive, which we cover in our note on hiring your first employee in the Netherlands and the 30 per cent ruling. Regimes of this kind are a genuine part of the relocation package and a reason the Netherlands is a common landing point, but they have conditions and they change, so they should be confirmed for each specific hire rather than promised in advance.
The statutory frame is worth knowing before any figure is put in an offer letter. Article 31a of the Wage Tax Act 1964 allows reimbursements and benefits in kind for living outside the country of origin to be treated, for designated groups of employees taken into employment from outside the Netherlands, as reimbursement of extraterritorial costs for at most five years and up to at most thirty per cent of the designated part of the salary, together with designated school fees. The same paragraph caps the amount taken into account per employee at thirty per cent of the maximum remuneration fixed by article 2.3 of the Dutch statute capping senior public sector pay, recalculated in proportion where the rule is applied for part of a calendar year only. That provision carries an announced amendment with effect from 1 January 2027, which means a hire made today will cross a change of rule inside its own five year run and should be priced against the later position rather than the current one.
The conditions sit one level down, in the Uitvoeringsbesluit loonbelasting 1965, and each of them is capable of defeating an application on its own. An incoming employee is one recruited from another country by, or sent to, a Dutch withholding agent, who has specific expertise that is absent or scarce on the Dutch labour market and who, for more than two thirds of the twenty four months before the employment in the Netherlands began, lived more than 150 kilometres from the Dutch border, measured excluding the territorial sea and the exclusive economic zone. Expertise is presumed from pay, except for employees placed in scientific research at a designated research institution and for doctors in specialist training, who have it whatever they earn: on the text in force for 2026 the annual salary must exceed EUR 48,013, or EUR 36,497 for an employee who has not yet reached thirty and holds a Dutch master’s degree or an equivalent foreign one, both amounts adjusted at the start of each calendar year. The maximum term is five years, and it is reduced by earlier employment or stay in the Netherlands in the preceding twenty five years, with narrow carve outs for calendar years in which the employee worked here at most twenty days or was present at most six weeks for holidays, family visits or other personal reasons, and with one single period of up to three consecutive months disregarded across the whole twenty five years.
Two mechanics decide what the facility is actually worth. On the text of the decree in force since 1 January 2026, the flat rate is not a single percentage across the term: granted on a joint request by the employee and the withholding agent, it runs at thirty per cent of the base for a period of at most twenty months, twenty per cent for the next period of at most twenty months, and ten per cent for the twenty months after that. And the facility has to be asked for. The request goes to the inspector, who decides by a decision open to objection, and it is backdated to the start of the employment only where it is made within four months of that start; filed later, the decision applies from the first day of the month following the request, and the intervening months are simply lost. A change of employer does not end it, provided the gap between the two employments is no longer than three months and the new employer establishes again that the employee qualifies, and where actual extraterritorial costs are being reimbursed the employer must choose, in the first wage period of each calendar year, whether to apply the flat rule at all, a choice that binds for the whole year.
Sequence it as a project
The move works when it is run as a project with the right order: decide the location, establish the entity, start immigration early, build the payroll and social security architecture, and only then bring the people. Run in that order it is a series of solvable steps. Run in the order the excitement suggests, people first, machinery later, it becomes a team that has relocated to a country where it cannot yet be legally employed, which is an expensive and stressful place to discover the sequence mattered.
If you are facing this, we can help. Montclare handles exactly these situations for international businesses and families. Our services are set out on our services page.
This article is informational and does not constitute tax, legal or financial advice. The right course depends on the facts. Each engagement is subject to scope and applicable regulation.