Expatriate Tax Alert: Important Update: New 30%-ruling regulations published – January 2012
In September 2011, we first informed you that changes were proposed regarding the 30%-ruling. Recently, the new regulations were published. Below we have highlighted the main points of the regulations.
1. Salary level and specific expertise
The specific expertise test will now be determined by a salary level per category. An additional category was introduced: Medical doctors working towards a specialism.
| Category | Taxable Salary | Including 30%-allowance | Further Conditions |
| General | € 35,000 | € 50,000 |
|
| Scientists Researchers | N/a | N/a | Must work for educational institutions or subsidized research facilities. |
| Medical specialists | N/a | N/a | Must meet certain registration requirements. |
| Young Masters | € 26,605 | € 38,007 | Must be under the age of 30 |
| Doctoral graduates 30 years or older | € 35,000 | € 50,000 | See point 5 below |
|
Doctoral graduates Under the age of 30 |
€ 26,605 | € 38,007 |
See point 5 below |
2. Scarcity
In addition, the employee’s specific expertise must be scarcely available on the Dutch labour market. The Dutch tax authorities have indicated that they will not check the scarcity in most cases since the salary level will be the leading indicator. The scarcity will only be checked in cases where the entire job population is above the salary level (e.g. professional football players).
3. Maximum period
The maximum period of the 30%-ruling was reduced from 10 to 8 years. This applies to new cases as of January 1, 2012. Individuals benefitting from the 30%-ruling before January 1, 2012 will not be affected by this measure.
4. Review Period of 25 years
Periods of previous stay / work in the Netherlands in the last 25 years will be deducted from the maximum 8-year period of the ruling. In practice, this means that fewer employees with the Dutch nationality will qualify for the ruling. In addition, periods of employment abroad for a Dutch-based employer, will also be deducted from the maximum 8-year period. In this respect, foreign assignment structures involving Dutch-based employers should be reviewed carefully.
According to the wording of the regulations, periods of work in the Netherlands in the last 25 years that do not exceed 20 days in a calendar year, are not deducted from the 8-year period. The same applies for periods of stay (other than for work) that do not exceed 6 weeks per year (with a one-time period of 3 consecutive months).
5. 150km Zone
Employees hired from within 150 kilometers from the Dutch border, are no longer eligible for the ruling if they spent 1/3rd or more of their time living in that zone in the last 24 months prior to being employed in the Netherlands. This will affect (future) employees hired from, in any case, Belgium, France (northern part), Germany and Luxemburg.
According to the Dutch tax authorities, this will also affect employees whom were originally hired from abroad and left the Netherlands if their stay outside of the Netherlands was less than 16 months. While we do not agree with the Dutch tax authorities interpretation of the regulations in this respect, the interpretation can lead to challenges from the Dutch tax authorities.
6. Variable Pay
According to the Government’s explanation of the new regulations, the 30%-ruling is no longer applicable on variable pay (e.g. bonus, options, etc.) after departure from the Netherlands unless the entitlement to such items is unconditional upon departure from the Netherlands. We note however that the wording of the new regulations leaves room for a different interpretation.
7. Doctoral Candidates / Graduates
Doctoral candidates/graduates, who obtain – or are in the process of obtaining – their doctorate and find a job within 1 year of obtaining their doctorate, will qualify for the ruling if they meet the taxable salary requirement. This covers not only doctoral candidates/graduates from Dutch institutions, but also doctoral candidates/ graduates from foreign institutions (even if hired from within the 150km zone).
For doctoral candidates/graduates under the age of 30, a lower taxable salary requirement of at least € 26,605.-, is applicable in order to qualify for the ruling.
8. Criteria must be met at all times
Employees receiving the ruling after January 1, 2012 (new cases) must meet the criteria (e.g. salary level, scarcity) for the ruling at all times. If an employee fails to meet the criteria for the ruling at any time, the ruling (automatically) comes to an end. This is in contrast to the 5-years interim test.
9. Transitional measures
The Dutch Parliament also confirmed the transitional measures. These measures will mainly affect employees who become subject to the 5-years interim test after January 1, 2012.
10. Recommendations
With the release of the new regulations, Grant Thornton has a number of recommendations. Below we have highlighted some of the recommendations for which Grant Tornton can offer assistance:
• Review whether new hires are eligible for the 30%-ruling under the new regulations (see point 1 – Salary level and specific expertise)
• Conduct a year-end review in order to assess which employees are “safe” and which employees may be in danger of losing the 30%-ruling
• Review assignment/employment contracts in order to determine whether the ruling is being executed in line with the new regulations
• Optimization of your compensation and benefits program with respect to expatriates. Even if certain (new) hires are not eligible for the 30%-ruling, the actual extra territorial costs (e.g. international school fees) may be reimbursed tax free.
The new regulations are now published. However, the implementation of the changes will still lead to practical questions. Grant Thornton Expatriate Services continues to be in close contact with the Dutch tax authorities in seeking further clarification on the aforementioned changes.
Questions
If you have any questions, please contact your tax advisor or one of our specialists at:
GT Expatriate Services B.V. at: +31 20 547 57 57 or: expatriate@gt.nl.
Download the alert as a PDF file.
Disclaimer
At Grant Thornton, we are committed to providing a highly professional service to help all of our clients meet their financial objectives, both business and personal. We have produced this information as part of this service but it is intended only as a guide in highlighting general issues which may be of interest to our clients. It is not a substitute for full professional advice and specialist assistance should be sought in relation to any particular circumstances. Accordingly no responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by Grant Thornton.