Understanding the Changes in the Expat Tax Regime in Netherlands
With proposals to amend the Dutch expat tax regime, the Dutch State Secretary for Finance announced that changes would be made to the ‘30% ruling regime’ for expatriate employees in the Netherlands. The amended regime will entitle qualifying expats to a net tax allowance of up to 30% of their total remuneration and the changes are expected to come into effect in 2012. Expatriate employees in Netherlands, working on a temporary basis can avail of “the 30% ruling regime”, resulting in a 30% tax free employment income in their hands. This provision was introduced by the Dutch Government to compensate them for specific expatriate costs.
On 20 September 2011 the Dutch Government presented the 2012 Tax Plan, which includes proposals to amend the Dutch expat tax regime. The amended regime will entitle qualifying expats to a net tax allowance of up to 30% of their total remuneration. The changes are expected to enter into force as per 1 January 2012.
The current conditions for application of the ruling are:
For a non-resident taxpayer hired abroad by an employer resident in the Netherlands:
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The employer must be obliged to withhold wage tax;
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The employee must possess specific expertise which is not easily available in the Dutch domestic labor market;
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Specific expertise is determined by a combination of the following conditions:
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(i)The employee’s level of education;
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(ii)The net salary range with regard to the employment in the Netherlands compared to that in the expatriate’s country of origin; and
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(iii)The employees must meet the required work experience with respect to the specific employment. If the expatriate possesses experience of at least 2.5 years in a comparable employment, the experience criteria are deemed to have been met.
If the condition (iii) is not met, they could still qualify for the 30% ruling, if conditions (i) and (ii) are met.
Duration
The duration of the 30% ruling regime is of 120 months, which commences from the date of employment in Netherlands. This time period could be reduced if employment or stay in the Netherlands has been terminated within a period of 15 years before the start of the new employment and provided the employee was appointed or residing in the Netherlands 10 years prior to being hired.
Proposed Changes
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Expertise – the employee needs to possess specific expertise, which has limited availability in the domestic labor market; will be deemed to be met if the employee earns a minimum salary;
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Time Period – the period which is taken into account for a reduction of the duration of the 30%-ruling will be increased from 10 to 25 years;
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Place of residence – Employees living within 150 km from the Dutch border are no longer entitled to the ruling;
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Education – Younger employees, who started work after undertaking Ph.D. studies in the Netherlands, can apply for the 30% ruling.
The minimum salary required to meet the special skills criterion under the 30%-ruling is set at EUR 50,619.
Expatriate taxation is very important for any international business expansion, and any kind of neglect could cost the company a heavy price. As the expat tax system varies in each country, taking the help of an expert will help in understanding the system of a country and avoid any unnecessary expenditure. A professional business consultant can provide the necessary guidance on tax equalization expat, EU VAT rules, etc. and ensure that your international business project a successful one.
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