Payroll Tax (Loonheffing)
Payroll tax (loonheffing) is the collective term for wage tax and social insurance premiums that your employer withholds from your gross salary each month. This is money you never see in your bank account – it goes directly to the Tax Authority. Payroll tax is actually a withholding tax on <a href="/en/glossary/income-tax">income tax</a>. This means the wage tax you've paid is offset against your final income tax. If you've paid too much payroll tax (for example because you have deductions), you get money back after filing. If you've paid too little, you need to pay the difference.
Example
You earn €4,000 gross per month. Your employer withholds approximately €1,200 in payroll tax. You receive €2,800 net (simplified). After filing, it turns out you're entitled to a €2,000 refund due to mortgage interest deductions – you had paid too much payroll tax.
Why does this matter?
Payroll tax determines what you keep net from your gross salary. As an employee, you don't directly control it, but by smartly using a provisional assessment you can get the difference back monthly instead of waiting until after filing.
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