Expatriate Tax Alert: Budget 2012
On September 15, 2011, the Dutch Government released their plans for the budget of 2012. Below, we have highlighted a number of points that may affect your expatriate employees, local employees and business. Adjustments to the plans may (still) take place as a result of the parliamentary discussions.
1. 30%-ruling
One of the most significant plans announced are the changes to the 30%-ruling regulations. The following planned changes were announced:
1. The specific expertise test will now be determined by a salary level. The taxable level, after application of the 30%-ruling must now be € 50,619.-. This means an increase in the salary level requirements compared to the current situation. We can provide a tailored approach on how to meet this (new) requirement. Companies will also still need to be able to demonstrate scarcity on the Dutch labour market.
2. A review period of 25 years will be applicable. This means that periods of previous stay / work in the Netherlands in the last 25 years will be deducted from the maximum 10-year period of the ruling. In practice, this means that fewer or no employees with the Dutch nationality will qualify for the ruling.
3. Employees hired from abroad, but within 150 kilometers from the Dutch border, will no longer be eligible for the ruling. This may affect (future) employees hired from not only Belgium and Germany but potentially also from Denmark, France Luxemburg and the U.K.
4. Doctoral candidates under the age of 30, whom obtain their doctorate and find a job within 1 year of obtaining their doctorate and have a taxable salary of at least € 26,605.-, will qualify for the ruling. This covers not only doctorate graduates from Dutch institutions, but also doctorate graduates from foreign institutions.
The Dutch Government also announced transitional measures regarding the aforementioned. This will mainly affect employees who would become subject to the 5 years interim test after January 1, 2012.
The text of the new regulations will be released at a later date this year and will hopefully provide more guidance on the current plans. In the meantime, it is advisable to check the following:
- Review your current 30%-ruling population in order to determine the consequences of the transitional rules as some employees may lose future eligibility for the ruling.
- Be mindful when recruiting new expatriates or when recruiting doctoral candidates on their eligibility for the ruling under current and future regulations. For example, it is no longer a rule of thumb that knowledge migrants will “automatically” qualify for the ruling.
- Optimization of your compensation and benefits program with respect to expatriates may be considered since it is expected that fewer expatriates will qualify for the 30%-ruling. Certain cost allowances (extra territorial costs) can still be paid tax free.
The proposed changes and explanatory notes still give rise to many questions. Grant Thornton Expatriate Services will be in touch with the Dutch tax authorities in the coming weeks to seek further clarification on the aforementioned changes.
2. 2012 Tax rates and rebates
Dutch individual income tax rates 2012*
Taxable Income (€) Rate (%) Cumulative tax (€)
1 - 18,945 1.95 369
18,945 - 33,863 10.80 1,980
33,863 - 56,491 42 11,483
56,491 52 >
* The tax rates that are applicable on individuals younger than 65 year old
* The amount of social security contributions (calculated over the first € 33,863) are not yet available. In 2011 the percentage was 31.15%.
Levy Rebates/ Tax Credits 2012* (€)
- General levy rebate 2,012
- Employment levy rebate - up to 65 years old (max.) 1,584
- Reduction Employment levy rebate for incomes > € 44,126 77
- Single-parent levy rebate 931
- Additional Single-parent levy rebate 1,293
- Income-related combination levy rebate (basis) 1,010
- Income-related combination levy rebate (max.) 2,101
- Levy rebate for social investments 0,7% of the investments
- Levy rebate for direct investments in venture capital and cultural investments 0,7% of the investments
- Parental leave levy rebate 4.11 an hour
* The levy rebate are applicable on individuals younger than 65 year old
* The life-course leave levy rebate is not applicable anymore
3. Vitality savings scheme
As of 2013, a new savingscheme (“vitaliteitsparen”) will be introduced to replace the existing salary savings scheme (“spaarloonregeling”) and the life-course savings scheme (“levensloopsparen”). Contrary to the existing salary schemes, employers will no longer be involved in this savings arrangement.
Employees, entrepreneurs and earners of income from other activities can participate in this saving scheme. This saving scheme enables participants to build up a financial buffer for a number of causes, i.e. study, partial retirement, transition from one job to another. However, there are no mandatory causes required. The amounts must be saved through financial institutions (bank, insurance companies).
- The contributions are tax deductible up to € 5,000 per year via the personal income tax return. It is possible to save up to € 20,000.
- There are no limits to the amount that can be withdrawn. Withdrawals by participants of 62 years or older will be limited to a maximum of € 10,000 per year.
- The savings are exempt from taxation in Box III.
- The withdrawal from the savings is subject to taxation.
The salary and the life-course savings scheme will be discontinued as of 2012. Transitional arrangements will be in place.
4. Deferred tax assessments
Two points in the regulations for deferred tax assessments (“conserverende aanslag”) in respect of pension and annuity in emigration situations will be aligned with the Dutch Supreme Court's rulings.
First, the Dutch tax authorities are obligated to determine whether the Netherlands has the right to levy tax on the surrender of the pension or annuity. Such a levy can in principle only be effectuated in cases where the Netherlands has retained taxation rights based on the applicable tax treaty or has sufficiently recognized the taxation rights of the country of residence.
Secondly, the regulation will be tailored to the freedom of movement in accordance with EU law. This will include measures regarding the tax base to be taken into account as well as removal of formal barriers (e.g. written waivers regarding the sustainment of capital).
5. Miscellaneous
A selection of other points from the announced plans are listed below:
- The requirement of keeping a kilometer log for company vans will be replaced by a single declaration of no private use.
- The regulation for R&D in respect of the Dutch wage withholding tax deduction for researchers of a company (employer) will be amended and lowered for the year 2012. In exchange a corporate income tax deduction will be introduced.
- The deadline for reimbursements (with the exception of the Childcare Allowance) will be September 1.
- The application for Childcare Allowance can no longer be applied for with retro-active effect
- The deduction for support of children only applies for the children younger than 21 years old
- The threshold for education expenses has been reduced to an amount of € 250
- The date for the calculation of the interest on amounts payable or refundable starts on July 1st of the year following the taxable year and ends on the day that the amount becomes payable. Interest will only be refunded in specific cases.
Questions?
If you have any questions, please contact your tax advisor or one of our Specialists at: Grant Thornton Expatriate Services B.V. at: +31 20 547 57 57 or: expatriate@gt.nl