Changes as of 1 January 2019
As of 1 January 2019 the 30%-facility becomes less attractive, because the duration of the ruling has been reduced from 8 to 5 years. The legislator based its decision upon a scientific report, to increase the efficiency of the facility.
More budgetary space has become available, since the Dutch dividend withholding taxes has not been abolished, so the legislator decided to implement transitional arrangements. This implies that the ruling does NOT end for extraterritorial employees that are enjoying the benefits for 5 years or more on the 1st of January 2019 or on the 1th of January 2020. Other employees will face the negative consequences of this decision from the Dutch government. We wonder why the government doesn’t respect all ongoing rulings.
Conditions for application of the 30%-facility
Below we will illustrate the basic principles that one needs to know before applying. For clarification we will add an example to show the tax advantage. The following conditions need to be met:
1. There must be an employer who is obligated to withhold income taxes.
Anyone is obligated to withhold taxes if one or more persons are in employment with the subject or when remunerations from earlier employment are provided. When the employer is not a resident of the Netherlands he is only obligated to withhold taxes if he has a permanent establishment in the Netherlands, or maintains a salary administration and it is registered at the Dutch Tax Authority.
2. The employee lived abroad during 2/3th of a period of 2 years before the employment commenced, at a distance of more than 150 km from the Dutch border.
The employment commences on the day the employment contract has been signed. On that moment the employee cannot exercise working activities in the Netherlands. A period of internship or education is not regarded as “working”. The period in which the PhD candidate resides in the Netherlands for obtaining his title is not regarded as a period of working and living in the Netherlands. If the employee decides to switch jobs while possessing a 30%-ruling, he doesn’t need to fulfill the stated conditions for the second time.
The distance of 150km is calculated as a direct line drawn towards the Dutch border, the travel distance has no relevance. Many expats from Germany and Belgium will therefore not fulfill this condition.
3. The employee possesses a specific expertise
Someone who receives a specific amount of remuneration is considered to possess a specific expertise. The minimum salary to be earned is 37.296 euros (in 2018), this amount is including the allowance for extraterritorial costs due to applying the 30%-facility.
When the fictional rule cannot be applied someone can still possess a specific expertise. This must be judged on the basis of the level of education, relevant working experience and the remuneration bracket in Netherlands compared to the country of origin of the employee.
The Dutch secretary of state has decided that some specific group of employees are considered to fulfill the criteria of specific expertise:
- Top managers of international concerns
- Scientists with specific knowledge
- Product specialists
- Teachers from international schools
- The employer and the employee need to apply jointly for the ruling, by filling in the required paperwork.
- Both parties need to agree about the height of the salary, split between the taxed part and the untaxed part. This can be achieved by creating an addendum to the employment contract.
- The duration of the 30%-ruling is 5 years (before: 8 years).
- When the employee no longer possess the specific expertise, e.g his salary doesn’t meet the criteria anymore, the ruling will end at this specific date.
Calculation of the fiscal benefits
The tax-exempt remuneration received by the employee is calculated as 30% of the base wage, increased by the compensation received. The base is composed by the wages in current employment during the duration of the facility, insofar there is no entitlement for avoidance of double taxation.
Example of fiscal benefits
The agreed upon salary in fiscal year 2017 of person A is 50.000 euro, excluding the allowance. We will abstract for the regular Dutch tax credits.
|Gross salary, with application of 30%-ruling||50.000||Gross salary, without application of 30%-ruling||50.000|
|Tax exempt part||21.429|
|Taxable wage||28.571||Taxable wage||50.000|
|Income tax||10.805||Income tax||19.559|
|Net salary||39.195||Net salary||30.441|
How can we assist you?
It is important that you are aware of all relevant conditions before applying for the 30%-ruling. We have experience in accompanying foreign employee’s appliances. Do you wish to receive more information or do you want us to apply for your 30%-ruling, please don’t hesitate to contact us.
Innovative Tax BV
Erik Jansen / Stefan Everts
Nijmegen, 4 December 2018