Employees from abroad who come to work in the Netherlands may receive a tax-exempt allowance of 30% of their salary: the 30% scheme.
Extraterritorial costs
This exemption relates to the reimbursement of extraterritorial expenses. These are the additional costs incurred by an employee as a result of working in a country other than the one in which they live. The employer may reimburse the employee’s actual extraterritorial expenses, but this is often a laborious process. The 30% scheme is a flat-rate scheme.
In order to apply the 30% scheme, the employer must hold a decision issued by the Tax and Customs Administration. This decision, which is valid for a maximum of 5 years, is issued by the Tax and Customs Administration on request if the employee:
- is employed by the employer;
- possesses specific expertise (this requirement is met if the annual salary is €39,467 or more, excluding the 30% scheme);
- has lived at a distance of more than 150 kilometres from the Dutch border for at least 16 months prior to their first working day in the Netherlands.
There are specific, somewhat more flexible conditions for employees carrying out scientific research or PhD research in the Netherlands.
Bonus
The Amsterdam Court of Appeal considered the 30% scheme in a case under which the employee’s employment was terminated with effect from 31 March 2017. However, the employee had been exempt from performing work since 17 January 2017. At the end of March, the employer paid the salary for the final month and a bonus of just over €628,000, to which the 30% scheme was not applied.
The employee reduces the taxable wages in his 2017 income tax return by 30%. The Court of Appeal rules that the definition of ‘wages’ for income tax purposes is consistent with that for payroll tax. For the purposes of payroll tax, the employer did not designate a portion of the wages for the targeted exemption under the 30% scheme. Designation by the employer is a condition for the application of any targeted exemption. The Tax and Customs Administration was therefore correct to refuse the deduction under the 30% scheme.
For the sake of completeness, the Court adds that the application of the 30% scheme ceases at the point at which the obligation to perform work ends. The employer was therefore unable to designate the bonus for the 30% scheme.