With effect from 1 January 2019, tax credits are no longer taken into account in the payroll of foreign taxpayers. This leads to a lower net wage. However, the discounts can be claimed via a Dutch income tax return.
Foreign taxpayer
That is someone who does not live in the Netherlands, but who receives income from one (or more) Dutch source(s). For example, you live in Belgium or Germany and work in the Netherlands for a Dutch employer. You then pay Dutch taxes and are usually also insured in the Netherlands. The employer deducts Dutch tax and contributions from your wages.
Another common source of Dutch income is a (holiday) home (or other real estate) located in the Netherlands. But income from real estate is obviously subject to payroll taxes. However, the foreign taxpayer usually has to file a Dutch income tax return.
Tax credits
The tax credits are deducted from the calculated wage and income tax. The amounts involved are hefty. The general tax credit amounts to a maximum of €2,265 for 2018; the employment tax credit to a maximum of €3,249. These amounts concern both the tax and contribution part of these discounts.
Both rebates are income-dependent. From an income from work and home (box 1) of €20,142 and above, the amount of the rebates becomes lower. The rebates are reduced to zero at most.
Qualifying foreign taxpayer
Only a qualifying foreign taxpayer is eligible for Dutch tax credits. This is the taxpayer:
- who lives in a member state of the European Union, Iceland, Liechtenstein, Norway, Switzerland or in our overseas municipality (Bonaire, Saba or St Eustatius);
- and of whose world income 90% or more is subject to Dutch income tax (requiring a income declaration be surrendered to the Inland Revenue).
Provisional assessment
Because the tax credit is no longer effected in payroll taxes in the case of a foreign taxpayer, the net monthly salary to be received from the employer is (substantially) lower. The foreign taxpayer can resolve this via a provisional income tax assessment. The tax authorities do not impose that assessment spontaneously. You have to ask for it.
From 1 January 2019, the tax credits will not be paid on a provisional assessment to a foreign taxpayer whose qualifying taxpayer has not yet been determined to be entitled to the tax credits.
Foreign taxpayers living in Belgium do have an immediate right to payment of the tax credits via a provisional income tax assessment. This is due to a specific non-discrimination provision in the tax treaty between the Netherlands and Belgium. The tax treaty between the Netherlands and Germany has no such provision. State secretary of Finance Snel has indicated in answers to parliamentary questions that he does not want to accommodate the foreign taxpayer in this.