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An expat is someone who works in a country other than the one in which they grew up. Most expats work temporarily outside their country of origin.
Highly qualified employees
In the Dutch knowledge-based economy, highly educated workers with specific knowledge and/or skills are of great importance. Where we are unable to train these workers ourselves, entrepreneurs, knowledge and research institutes, and the government endeavour to recruit them from abroad.
Extraterritorial costs
Working in a country other than the one in which the employee grew up entails additional costs. We refer to these costs as extraterritorial costs. Employers are permitted to reimburse or provide these costs to the expat free of payroll tax.
In this regard, payroll tax provides for a so-called targeted exemption, so that allowances and benefits in kind relating to extraterritorial expenses are not charged against the discretionary allowance under the work-related expenses scheme. In order to apply this exemption, the employer must provide the Tax and Customs Administration with supporting documents to substantiate which extraterritorial costs actually incurred by the expat have been reimbursed or provided.
Incentives
Both employers and expats regard the process of substantiating actual extraterritorial costs as very labour-intensive from an administrative point of view. That is why the 30% scheme was introduced.
The 30% scheme means that 30% of an employee’s gross remuneration may be paid (in cash) and/or provided (in kind) tax-free (under a specific exemption).
These reimbursements and benefits in kind are then deemed to cover the extraterritorial costs. No justification of those costs is then required.
Terms and Conditions of the 30% Scheme
The conditions for applying the 30% scheme to incoming expats are:
- the employee must have a specific expertise;
- The employee’s role must involve shortage in the Dutch labour market;
- the employee must be a foreign national and, in the 24 months prior to taking up employment, must have lived for less than 16 months at a distance from the Dutch border of 150 kilometres or more;
- Previous periods of residence in the Netherlands are deducted from the duration of the 30% scheme (the duration of the 30% scheme is: 5 years; up to and including 2018: 8 years).
Specific expertise
A new employee is deemed to possess specific expertise if, excluding the 30% allowance, they receive a gross annual salary of €37,743 (2018: €37,296) or more. For an employee under the age of 30 who has completed a master’s degree, a lower salary threshold of €28,690 (2018: €28,350) gross per annum applies. Certain academic researchers and doctors in training are not required to meet the salary threshold.
150 kilometres
The distance of 150 kilometres is measured as the crow flies. This refers to the point on the Dutch border that is closest, as the crow flies, to the expat’s place of residence abroad. Where the expat actually works is irrelevant.
Term
Provided that the application for the scheme has been submitted in good time (see below), the qualifying expat may, for a period of 5 years make use of the 30% scheme.
Transitional arrangement
With effect from 1 January 2019, this term has been reduced to 5 years. This also applies to the 30% schemes that are already in place at that time (despite the fact that the decisions issued in respect of them specify a term of 8 years).
With effect from 1 January 2019, following the expiry of the 5-year 30% scheme, it will no longer be possible to reimburse the expat for actual (documented) extraterritorial expenses on a tax-free basis. A transitional arrangement will be introduced for certain school fees at international schools.
Partial foreign tax liability
The reduction in the duration of the 30% scheme also means that expats can only opt, for a period of 5 years, to pay income tax in the Netherlands as if they were partially liable for tax abroad (this option to partial foreign tax liability (This is not explained in further detail in this note).
Decision
For incoming expats, the 30% scheme only applies once the Tax and Customs Administration has issued a decision to that effect. Applications for this decision should be made to the Tax and Customs Administration in Heerlen. The relevant form is available on belastingdienst.nl.
If the application is made within 4 weeks of the expat’s start date, the 30% scheme takes effect from the start date. If the application is submitted later, the 30% scheme will commence on the first day of the month following the month in which the application was submitted (the duration of the scheme will then be shorter).
Outgoing expats
The 30% scheme also applies to:
- Dutch employees who are posted to countries in Africa, Asia, Latin America and a number of designated Eastern European countries;
- Dutch employees who are seconded to another country to carry out scientific research or teach;
- civil servants at Dutch diplomatic missions abroad;
- civil servants and military personnel posted to the Netherlands Antilles or Aruba, and military personnel posted outside the Kingdom of the Netherlands.
The 30% scheme may be applied if, over a 12-month period, the employee spends at least 45 days in one of the locations to which they have been posted. Periods of stay of less than 15 days do not count towards this.
The purpose of this note is to outline a scheme. For the sake of readability, matters have therefore been simplified. VWG is therefore not liable for the consequences of actions taken or not taken as a result of this memorandum.