Increase minimum wage effective from the 1st of July 2024
The statutory minimum wage was increased by the Ministry of Social Affairs and Employment in stages through 2024. With effect from the 1st of July 2024, the minimum wage on all three islands was increased to USD 1,750.67 per month for a 40-hour working week.
Tax-free allowance and minimum wage
For the 2024 tax year, the tax-free allowance is based on the statutory minimum wage, which takes the increase in the minimum wage with effect from the 1st of July 2024 into account. The purpose of this coupling is to ensure that an employee earning the statutory minimum wage does not need to pay tax on this wage.
Loonheffing (payroll tax) on increase in minimum wage
The increase in the minimum wage with effect from the 1st of July 2024 combined with the application of the payroll tax tables may, in some instances, result in withholding of payroll tax whilst no income tax is due on an annual basis. This is due to the fact that employees on the minimum wage did not use the full tax-free allowance in the first half of the year, and slightly exceed the tax-free allowance in the second half of the year. This deduction involves only a few dollars per month.
Figures and calculations
The tax-free allowance for 2024 amounts to USD 20,424, which converts to USD 1,702 per month. In the first six months of 2024, the statutory minimum wage per month was below the tax-free allowance. However, with effect from the 1st of July 2024, the statutory minimum wage was increased to USD 1,750.67, which exceeds the tax-free allowance.
Decision State Secretary for Finance
The State Secretary for Finance has approved that the withholding agent does not need to withhold payroll tax as long as the following three conditions are met:
- The minimum wage agreed with the employee is USD 10.10 per hour.
- The number of working hours does not exceed 40 hours per week.
- The employee is entitled to the tax-free allowance and monetises it against the withholding agent according to Section 8 Subsection 2 of the ‘Wet op de Loonbelasting BES’.
Income tax for employees
An employee with a working week of up to 40 hours, who earns the minimum wage throughout the year and has no other income, shall not be liable to pay income tax through application of the tax-free allowance.
Correction process for overpayment of payroll tax
If you, as a withholding agent, have withheld too much payroll tax then you can contact your payroll administrator for the correction process. This ensures that the excess payroll tax withheld is refunded directly to the employee. If this is not possible then the inspector lends cooperation in requests for correction of overpaid payroll tax.
Temporary scheme
This decision is temporary and is valid from the 1st of July 2024 up to the 1st of January 2025. The full text of the decision can be found via the following link:
https://www.officielebekendmakingen.nl/stcrt-2024-24267.html