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  • Service: Tax, International Executive Services
  • Type: Regulatory update, Survey report
  • Date: 2/26/2014

Income Tax 

Taxation of international executives
Tax returns and compliance
Tax rates
Residence rules
Termination of residence
Economic employer approach
Types of taxable compensation
Tax-exempt income
Expatriate concessions
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Tax reimbursement methods
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits
Sample tax calculation


All information contained in this document is summarized by KPMG Meijburg & Co Tax Lawyers, the Netherlands member firm of KPMG International, based on the Dutch Personal Income Tax Act 2001 and the Dutch Wage Tax Act 1964. These laws can be found at www.Overheid.nl.


Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?


1 April.


What is the tax year-end?


31 December.


What are the compliance requirements for tax returns in the Netherlands?


Residents


On entering the Netherlands, the employee must register as a resident in the municipality where he/she will live if the expected stay in the Netherlands exceeds four months. S Subsequently, a National Identification Number/”BSN” (former sofinumber) is granted by the municipality.


Income tax returns are based on a 31 December year-end.


Spouses are not taxed jointly. Each individual is treated as a separate taxable entity for his/her personal income (such as employment income). In principle, the non-personal income is taxed separately on the spouse who is the beneficial owner of the income. However, spouses are allowed to divide their non-personal income between them as they choose to, as long as all the income is reported. The income will be taxed with the spouse to whom the income has been attributed. Non-personal income of minors is attributed to the parents.


Returns must normally be filed by 1 April following the end of the year of income. Returns prepared by a registered tax professional are generally covered by a tax return lodgment extension program.


If the tax authorities have not issued an individual income tax return form, the employee may have to request one following 31 December of the year in question. This is the case if individual income tax is payable by the employee.


Based on the return, the tax authorities will issue an assessment taking into account any Dutch wage tax withheld during the year. It is possible to file an objection against the final assessment within six weeks from the date of issue of the assessment.


Married couples are tax partners, yet file tax returns as separate individuals. Unmarried couples living together at the same address will, under certain conditions, be treated as tax partners, too. Although tax partners will be taxed separately, certain income components can be taxed more tax efficiently. The non-working tax partner of a working tax partner can, in principle, claim 60 percent of the general tax credit (maximum EUR2,103).


Non-residents


Non-residents should also obtain a National Identification Number. If the employee has less than four months housing available in the Netherlands he/she will have to obtain a National Identification Number by way of an RNI registration at an RNI Desk. Eighteen Dutch municipalities have an RNI desk: Alkmaar, Almelo, Amsterdam, Breda, Den Haag, Doetinchem, Eindhoven, Goes, Groningen/Eemshaven, Heerlen, Leiden, Leeuwarden, Nijmegen, Rotterdam, Terneuzen, Utrecht, Venlo and Zwolle. If a non-resident employee has housing available for more than four months the employee must register as a resident in the municipality.


Non-resident spouses are not considered tax partners and are therefore not allowed to divide their non-personal income between them. However, EU residents and residents of specified countries with which the Netherlands have concluded a tax treaty providing for the exchange of information can elect to be taxed as resident taxpayers. Such an election may have certain repercussions. On the one hand, a deemed resident taxpayer must report his/her worldwide income (although non-Dutch-source income will be subject to relief). On the other hand, all deductions can be claimed (including the personal tax credit).


This election will only be advantageous if the assignee’s worldwide income is, to a large extent, subject to Dutch income tax.


Since there are several claw back possibilities for the Dutch tax authorities, one should seek advice before opting to be treated as deemed resident taxpayer.


This election ruling will be cancelled per January 1, 2015. A ruling for qualifying foreign taxpayers will be introduced.


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Tax rates

What are the current income tax rates for residents and non-residents in the Netherlands?


Residents


Tax is calculated by applying a progressive tax rate schedule to taxable income.


The income tax rates are as follows.


Box 1


Income tax table for 2014


Taxable income bracket Income tax rate Social security tax rate
Bracket EUR EUR Percent Percent
1 0 19,645 5.10 31.15
2 19,646 33,363 10.85 31.15
3 33,364 56,531 42.00 0.00
4 56,532 Over 52.00 0.00

Box 2


A flat tax rate of 25 percent is applicable.


Box 3


A flat tax rate of 30 percent is applicable on deemed income from savings and investments (4 percent of net value of assets at the beginning of the year).


Non-residents


Tax is calculated by applying a progressive tax rate schedule to taxable income.


The income tax rates are as follows.


Box 1


Income tax table for 2014


Taxable income bracket Income tax rate Social security tax rate
Bracket EUR EUR Percent Percent
1 0 19,645 5.10 31.15
2 19,645 33,363 10.85 31.15
3 33,363 56,531 42.00 0.00
4 56,531 Over 52.00 0.00

Box 2


A flat tax rate of 25 percent is applicable.


Box 3


A flat rate of 30 percent on deemed income from savings and investments (4 percent of net value of assets at the beginning of the year).


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Residence rules

For the purposes of taxation, how is an individual defined as a resident of the Netherlands?


Residency is determined on the facts of each case. The following facts are taken into account (not limitative):


  • the nature of the stay in the Netherlands
  • the length of stay
  • where the family lives
  • the individual’s center of economic interests
  • the individual’s intentions
  • whether or not the individual is registered in a municipal register
  • the place where bank accounts are held
  • the place where the person’s assets are located
  • the terms of his/her employment.

The tax courts look to whether there are durable ties of a personal nature with the Netherlands. The term durable does not mean permanent; the closeness of the tie is more important. Ties of a personal nature exclude pure business considerations; personal circumstances, such as the maintenance of an abode, play a more defining role. Residence abroad does not, in itself, exclude the possibility of being considered a tax resident in the Netherlands. However, dual residence resulting in double taxation may be resolved under the terms of a particular tax treaty.


If a resident leaves the Netherlands and returns within a year, he/she remains a Netherlands resident, unless he/she established residence, as interpreted by Dutch law, in Curaçao, Aruba, Saint Martin, the Caribbean territory of the Netherlands (Bonaire, Saint Eustatius, and Saba), or in a foreign country. Dutch civil servants living abroad are deemed resident in the Netherlands.


Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.


No.


What if the assignee enters the country before their assignment begins?


The assignee might be considered a resident of the Netherlands as of the date of entry.


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Termination of residence

Are there any tax compliance requirements when leaving the Netherlands?


There are no special procedures for terminating tax residence in the Netherlands. However, individuals should de-register from the municipal register of residents before they leave the country.


What if the assignee comes back for a trip after residency has terminated?


In principle, no consequences.


Communication between immigration and taxation authorities


Do the immigration authorities in the Netherlands provide information to the local taxation authorities regarding when a person enters or leaves the Netherlands?


No. However, in the case where a person registers with the local town hall, such registration or deregistration is in principle shared with the tax authorities.


Filing requirements


Will an assignee have a filing requirement in the host country after they leave the country and repatriate?


This is possible; for instance if the assignee receives income relating to the employment in the Netherlands or if the assignee still has a property in the Netherlands.


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Economic employer approach

Do the tax authorities in the Netherlands adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the tax authorities in the Netherlands considering the adoption of this interpretation of economic employer in the future?


Yes, the Dutch Supreme Court has adopted an economic employer approach for the interpretation of the term employer. The Supreme Court has ruled that the host entity is considered as the employer for treaty purposes if the following conditions are met.


  • The host entity holds a position of authority over the assignee.
  • The host country entity bears the costs; associated employment expenses are specifically and individually traceable recharged to the host entity.
  • The risks and benefits of the duties performed by the assignee are attributable to the host entity.

De minimus number of days


Are there a de minimus number of days before the local tax authorities will apply the economic employer approach? If yes, what is the de minimus number of days?


No.


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Types of taxable compensation

What categories are subject to income tax in general situations?


Under the income tax regime income is divided into three separate boxes, each of which is governed by its own rules.


  • Box 1 (living and working) covers business and employment income and income from the main private residence.
  • Box 2 (substantial interest) includes income and gains from substantial shareholdings.
  • Box 3 (savings and investment) covers income from capital.

The three boxes exist independently of each other. This means that losses from one box cannot be offset against income from another box. An exception is made for losses from Box 2. Under certain conditions these can converted into a tax credit in Box 1.


In Box 1, employment income is taxed. This includes all employment income, such as wages, salaries, pensions, and benefits-in-kind. This income is generally subject to wage tax withholding. In general, this may be credited in determining the final income tax liability or refund. Deductions for employment expenses are not allowed, apart from a limited deduction for commuting by public transport (such as, bus or train). However, a tax-free reimbursement of certain employment expenses is permitted. The taxable benefit of the use of a company car for private purposes is set at 25 percent of the list price (unless certain environmental requirements are met in which case the percentage is 4, 7, 14, or 20 percent). This taxable benefit must be taken into account in the payroll. Contributions by employers to qualifying employee pension schemes are not taxed in the hands of the employee. Contributions from employees to such schemes are in principle tax deductible, if the employer withholds these contributions. Pension benefits paid out under the scheme are, conversely, taxable. Non-Dutch pension schemes are not considered as qualifying pension schemes. As a result, the employee’s contributions are not considered tax deductible and the employer’s contributions are considered taxable. It is possible to request to the Dutch Tax Authorities to consider the non-Dutch pension scheme as a qualifying pension scheme for a maximum period of 60 months if certain conditions are met.


In addition, Box 1 covers income from the primary residence. Mortgage interest payments are tax deductible up to 30 years if certain conditions are met (new legislation introduced per January 1, 2013). If the income from the primary residence is negative (deemed income minus mortgage payments), this loss can be offset against other income covered by Box 1, which is taxed at a progressive rate.


Capital gains taxes are not applicable, unless there is a substantial interest in a company (Box 2 income). Box 3 taxes capital and investment. Taxable income is determined on the basis of a presumptive, that is, deemed return on capital. This deemed return has been fixed at 4 percent of the net capital at the beginning of the tax year. The deemed income is taxed at 30 percent.


Resident taxpayers are subject to income tax on their worldwide income.


Non-resident taxpayers are subject to Dutch tax on Dutch-source income. Basically, only a substantial interest in a Dutch-based company, income from Dutch real estate and from profit shares in a Dutch business (other than when derived from securities or services) will be taken into account.


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Tax-exempt income

Are there any areas of income that are exempt from taxation in the Netherlands? If so, please provide a general definition of these areas.


In Box 1, employment income or certain costs can be paid by the employer (partly) tax-free under strict conditions, for instance a relocation allowance and extraterritorial costs.


In Box 3, certain goods for personal use are not considered assets to include in the net capital in Box 3.


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Expatriate concessions

Are there any concessions made for expatriates in the Netherlands?


30 percent ruling


The Netherlands has a special tax regime for expatriates, the so-called 30 percent ruling.


According to the ruling, the employer may pay the employee a tax-free allowance that does not exceed 30 percent of his/her total remuneration. This allowance should cover the employee’s extraterritorial costs the employee incurs as a result of his/her employment in the Netherlands.


In addition, the employer may reimburse the fees for the employee’s children to attend an international school (or international department of a local school) tax-free.


The ruling may be granted for a maximum period of 8 years for new employments commencing after 1 January 2012. Rulings for employments with a commencement date before 1 January 2012 have a maximum duration of 10 years. Periods of earlier employment or stay in the Netherlands within the reference period will reduce the duration of the 30 percent ruling. For employments commencing after January 1, 2012, the reference period has been extended from 10 to 25 years.


Employees with the Dutch nationality may qualify for the 30 percent ruling provided they meet the legal requirements.


In order to qualify for the 30 percent ruling, the following conditions have to be met in general.


  • The employee has specific expertise, which is scarce or not available on the Dutch labor market.
  • The employee has been recruited from abroad.
  • The employer is (or is appointed as) a Dutch wage tax-withholding agent.

Specific expertise and scarcity criterion


In order for a specific expertise to be proven, only the salary will be assessed. The converted annual salary for tax purposes in the Netherlands must be at least EUR 36,378, excluding the untaxed 30 percent allowance. This is equal to a gross salary of EUR 51,969 including 30 percent allowance. A reduced salary threshold of EUR 27,653 will apply to masters up to the age of 30 who have been recruited from abroad; this is equal to EUR 39,504 including 30 percent allowance. Academics are exempt from the salary threshold. The amounts are index-linked and will be revised annually.


In addition to the specific expertise criterion, also a scarcity criterion applies. The specific expertise must be scarce or not available on the Dutch labor market. However, the Deputy Minister of Finance has indicated that scarcity will only be assessed in exceptional situations. One of the professional groups that will be assessed on the scarcity criterion is that of professional football players.


Recruited from abroad


In principle, the employee must have been recruited from abroad. Prior to employment in the Netherlands, the employee must have resided outside a 150 kilometer radius of the Dutch border for two-thirds of a 24 month period. This condition will not apply to employees who previously stayed in the Netherlands and who met the 150 kilometer test when they first arrived for their employment or assignment and this employment or assignment commenced less than 8 years ago. For doctoral students, the period of their doctoral research will not be taken into account when assessing whether an employee is recruited from outside the Netherlands. As long as a doctoral student resided outside the 150 kilometer boundary before commencing their doctoral research, they will be eligible for the 30% ruling if their employment in the Netherlands commences directly on completion of their research.


KPMG Meijburg & Co in the Netherlands has a special agreement with the Dutch Tax Authorities based on which we can determine whether an employee meets the conditions of application of the 30% ruling and request the Dutch Tax Authorities to grant the 30% ruling without them checking the content of the application.


The question whether the 150 kilometer requirement is compatible with EU law has been brought to the European Court of Justice.


Wage tax withholding agent


In the following situations, there is a Dutch withholding agent for wage tax purposes.


  • A Dutch company employs the employee.
  • The employee is employed by a foreign company, which has a permanent establishment in the Netherlands.
  • The employee is employed by a foreign company, which does not have a permanent establishment in the Netherlands. However, the Dutch Ministry of Finance has appointed the foreign employer as a wage tax-withholding agent at the foreign company’s request.
  • For Dutch wage tax purposes a deemed permanent establishment might exist.

As a deemed permanent establishment will be considered:


  • Activities performed by an employee on the Dutch section of the continental shelf for a consecutive period of at least 30 days (i.e. on a drilling platform or on board of a supply ship);
  • The supply of personnel on the Dutch labor market.

The second bullet refers to the supply of employees, who will perform employment activities in the Netherlands, by a foreign (non Dutch) company to a third party. This provision can also be applicable in case of provision of personnel by an employment agency and in concern relations.


In order to make the optimal use of the 30 percent ruling, it is necessary that all the employee’s remuneration (including stock options/equity-based remuneration granted from abroad) are included in the monthly Dutch payroll administration.


When an employment in the Netherlands ends, the 30% ruling can only be applied up to and including the month following the month in which the employment has ended. The 30% ruling cannot be applied to payments made after this month.


As of January 1, 2013 new legislation has been introduced with regard to employees assigned to the Netherlands in concern relations. If a Dutch withholding obligation exists, the Dutch entity can take over this obligation when approved by the Dutch Tax Authorities. This new legislation is only applicable for new assignments as of January 1, 2013 and the application needs to be filed per foreign entity.


Application


The application for the 30 percent ruling must be filed within four months after commencement of employment activities in the Netherlands. Employer and employee should sign an addendum to the employment contract in which they agree on application for the 30 percent ruling. This contract must be stated explicitly based upon legal requirements.


The resident employee to whom the 30 percent ruling is granted can elect to be treated as a partial non-resident taxpayer for wage tax and individual income tax. A partial non-resident taxpayer is subject to tax in Box 1 and to tax on specific sources of income (such as a second home in the Netherlands). The deductions in Box 1 may be claimed (such as mortgage interest paid in respect of Dutch principal residence and alimony payments).


This election to be treated as a partial non-resident of the Netherlands can be made in each calendar year in which this status should be applicable during the maximum application period of the 30 percent ruling. Based upon a special agreement, US citizens and US green card holders who have opted to be treated as a partial non-resident will be treated in the Netherlands as a real non-resident taxpayer.


Non-residents can also apply for the 30 percent ruling. Supervisory Board Members may apply for the 30 percent ruling as well.


As said, the 30 percent allowance should cover the employee’s extraterritorial costs the employee has to make because of his/her employment in the Netherlands.


There is no specific definition in the legislation of what constitutes extraterritorial costs. However, a resolution indicates the tax authorities’ position on extraterritorial costs, which could be a tax challenge. Member firm clients should seek advice with respect to the reimbursement of extra territorial expenses in addition to the 30 percent ruling. A lot of reimbursed costs to international mobile employees, which may appear to be business costs that can be reimbursed tax-free, are considered extraterritorial costs; consequently reimbursing these costs is taxable if the employee has been granted the 30 percent ruling.


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Salary earned from working abroad

Is salary earned from working abroad taxed in the Netherlands? If so, how?


Non-residents (with or without the expatriate concession), who are not directors or supervisory board members of a Dutch company, are not subject to Dutch-income tax on compensation attributable to services performed outside the Netherlands. Employment-source income is calculated based on the number of working days spent in the Netherlands for the taxable year divided by the actual working days multiplied by the amount of total employment income.


In the situation that no tax treaty is applicable, employment compensation paid to an employee with a Dutch wage tax withholding agent, who performs his or her services outside the Netherlands and who is not liable to tax outside the Netherlands, will be taxed in the Netherlands provided that the employee also performs some employment activities in the Netherlands.


Residents, including resident individuals with the expatriate concession, are subject to Dutch income tax on their worldwide compensation. Based on a tax treaty with the state where the services are performed, relief from double taxation may be available in the Netherlands.


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Taxation of investment income and capital gains

Are investment income and capital gains taxed in the Netherlands? If so, how?


Residents are subject to personal income tax in respect of their worldwide net income including income from substantial interests in Box 2 and investments in Box 3.


Box 3 deals with capital income, that is, income from savings and investments. Taxable income is determined on the basis of a deemed return on capital. This deemed return has been fixed at 4 percent of the net capital that is assets less qualifying liabilities, measured on 1 January. The 4 percent is applied after deduction of an exempt amount. This amount (EUR21,139 per taxpayer), which is available to resident taxpayers only, may be increased by a supplement for persons who are 65 or older. It is emphasized that the taxable income is computed without regard to the actual income received. Thus, if actual income exceeds 4 percent, tax will still only be levied on 4 percent. Conversely, there is no reduction in tax if actual income is less than 4 percent. The deemed income is taxed at 30 percent.


For these purposes, assets include not only money, shares, bonds, and tangible assets (such as a second house) but also any intangible assets, which have an economic value. The latter could include, for example, permits, licenses, and patents. Non-qualifying annuities are taxed in Box 3. Depending on the circumstances, rights arising under trusts may be covered by Box 3.


The way in which income is computed under Box 3 means that interest which is paid (for example, in order to finance leased real estate or expenses incurred for the maintenance of such real estate) is no longer relevant for tax purposes.


Box 2 deals with a substantial interest in companies. A substantial interest means (options to) 5 percent or more of the shares or a profit right of 5 percent or more of the profit. Dividends and capital gains are taxed at a flat rate of 25 percent.


Non-residents are subject to Dutch income tax on income derived from certain specified domestic sources including income sources such as income from real estate located in the Netherlands.


Dividends, interest, and rental income


Dividends, interest and rental income are not taxable in Box 3. In Box 2, dividends are taxed.


Gains from stock option exercises


The spread (difference of the option price and the fair market value of the underlying shares at the moment of exercise) of stock options that have been granted as employment remuneration will be taxed at the moment of exercise of the stock options.


Foreign exchange gains and losses


Not taxable/deductable.


Principal residence gains and losses


Not taxable/deductable.


Capital losses


Not deductible in Box 3. A loss from selling a substantial interest is deductible in Box 2.


Personal use items


Not taxable/deductable.


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Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in the Netherlands? If so, please discuss?


Yes, only applicable to capital gains from substantial interest.


Are there capital gains tax exceptions in the Netherlands? If so, please discuss?


Pre-CGT assets


No.


Deemed disposal and acquisition


No.


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General deductions from income

What are the general deductions from income allowed in the Netherlands?


Box 1 covers business income, employment income (including casual earnings), income in the form of periodic payments (such as qualifying annuities and alimony), as well as income from the main private residence.


Income (positive and negative) from the principal residence:


Income from the principal residence is taken into account in Box 1. The most significant item under this heading is qualifying mortgage interest on the principal residence. This is treated as negative income and leads to a deduction in Box 1. As of January 1, 2013, mortgage loans need to be paid off on an annuity basis. Transitional rules are applicable. The amount of the deduction is limited in time to a maximum period of 30 years. In addition, mortgage interest can only be deducted from a loan relating to a subsequent residence insofar as the loan does not exceed the purchase price of the subsequent residence minus the difference between the sale price and the mortgage on the former residence. For example, new principal residence EUR400, old principal residence had a mortgage on it for EUR75 and was sold for EUR200; interest payments related to the new principal residence can only be deducted for a maximum mortgage of EUR400 – (200 – 75) = EUR275.


Income under this heading is also deemed to arise, the amount being set as a percentage of the tax value established periodically by the municipal authorities. For tax values of more than EUR1,040,000, the income is set at EUR 7,350 plus 1.80 percent of above EUR1,040,000. For tax values between EUR75,000 and EUR1,040,000 the income is set at 0.70 percent of the value. Income from other properties (including vacation homes) is taken into account in Box 3.


Exceptionally, the income from more than one private residence may temporarily (with a maximum of four calendar years) be attributed to Box 1, such as where alterations are carried out on a private residence before moving into it or where a new private residence has already been purchased, but the old residence has not yet been sold and one of the two properties is empty.


Other deductions


Deductions are also allowed for expenses such as qualifying retirement annuity premiums and the personal expenses like alimony. The rules regarding the deductibility of retirement annuity premiums are complicated, and depend on the calculated pension gap of the taxpayer.


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Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in the Netherlands?


Current year gross-up.


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Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in the Netherlands? For example, pay-as-you-earn (PAYE), pay-as-you-go (PAYG), and so on.


Pay-as-you-earn (PAYE).


When are estimates/prepayments/withholding of tax due in the Netherlands? For example in monthly, annually, both, and so on.


In principle, on a monthly basis.


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Relief for foreign taxes

Is there any Relief for Foreign Taxes in the Netherlands? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?


Relief from double taxation for resident individual taxpayers may be provided by way of tax treaty or, depending on the circumstances, under domestic rules.


Income from foreign employment is generally covered by the exemption provisions under treaties or the unilateral decree. This is often referred to as exemption with progression, since the foreign income, although exempt, is taken into account in determining which brackets are applicable to the taxpayer’s remaining income. Arithmetically, this is achieved by including the foreign employment income in taxable income but then reducing the Dutch tax on this total income by that portion which is attributable to the foreign income. The formula for computing exemption relief is broadly as follows:


(Foreign income/worldwide income) x Dutch tax (not including National Insurance contributions) on worldwide income


Through this formula the exemption is provided against the average tax rate. The result of this computation is deducted from the Dutch tax on worldwide income. The foreign tax on the foreign income in question may be more or may be less than the amount of this deduction from Dutch tax.


In cases where the worldwide income is smaller than the foreign income a carry forward of the excess may apply. In some cases (such as for statutory directors), the credit method may apply.


Income earned in the capacity of a statutory director is generally covered by the credit provisions under treaties or the unilateral decree. Under certain conditions the exemption method may apply.


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General tax credits

What are the general tax credits that may be claimed in the Netherlands? Please list below.


Depending on an individual’s (family) position, the following tax credits may apply:


  • the general tax credit
  • the labor tax credit
  • the work bonus (applicable to those employees over the age of 61)
  • the combination tax credit (for working parents)
  • the parental leave tax credit
  • the single parent tax credit
  • the tax credit for disabled young people
  • the old-age tax credit
  • the old-age tax credit for single persons
  • the tax credit for environmental investments

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Sample tax calculation3

This calculation assumes a married taxpayer resident in the Netherlands with two children whose three-year assignment begins 1 January 2014 and ends 31 December 2016. The taxpayer’s base salary is USD100,000 and the calculation covers three years.


2014
USD
2015
USD
2016
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = EUR0.747.


Other assumptions


  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • Interest income is not remitted to the Netherlands.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income before applying the 30% ruling


Year-ended 2014
EUR
2015
EUR
2016
EUR
Days in the Netherlands during year 365 365 366
Earned income subject to income tax
Salary 74,700 74,700 74,700
Bonus 14,940 14,940 14,940
Cost-of-living allowance 7,470 7,470 7,470
Housing allowance 8,964 8,964 8,964
Company car 9,337 9,337 9,337
Moving expense reimbursement 7,190 0 7,190
Home leave 0 3,735 0
Education allowance 0 0 0
Total earned income 122,601 119,146 122,601
Other income 0 0 0
Total income 122,601 119,146 122,601
Deductions 0 0 0
Total taxable income 122,601 119,146 122,601

Calculation of tax liability


2012
EUR
2013
EUR
2014
EUR
Taxable income as above 122,601 119,146 122,601
Dutch tax thereon (incl. national insurance contributions) 37,841 36,584 37,841
Less:
Domestic tax rebates (incl. dependent spouse rebate) 2,994 3,017 2,994
Foreign tax credits 0 0 0
Total Dutch tax 34,847 33,567 34,847

Notes


  • The 30 percent ruling is applicable.
  • The extraterritorial costs are taxable.
  • The housing allowance is fully taxable (as paid in-cash and as a benefit-in-kind), however, taxed according to the 30 percent ruling.
  • The taxable private use of the company car is 25 percent of the list value of the company car; it is assumed that the list price is USD50,000.
  • It is assumed that the education allowance is for an international school (which can be reimbursed tax-free).
  • Employee is liable to social security. Therefore, the income tax rates include the national insurance element.
  • Non-working spouse is entitled to 60 percent of the general tax credit to be transferred to his/her personal bank account.
  • At least one child is younger than 12.
  • The calculations for 2015 and 2016 are based on the tax rates of 2014.



1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.


2Sample calculation generated by KPMG Meijburg & Co Tax Lawyers, the Netherlands member firm of KPMG International, based on the Dutch Personal Income Tax Act 2001 and the Dutch Wage Tax Act 1964. These laws can be found at www.Overheid.nl.



© 2014 KPMG Meijburg & Co., a Netherlands partnership and a member of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

 

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Taxation of international executives