Netherlands expatriate employees - Introduction
The Dutch tax landscape is undergoing significant changes, particularly concerning the '30%-facility' for expatriate employees and the partial non-resident Dutch tax regime.
These revisions, effective from 1 January 2024, are reshaping the financial outlook for expatriates in the Netherlands.
Transforming the 30% facility
The '30%-facility' is a notable tax incentive for employees seconded or hired from abroad to work in the Netherlands.
Previously, eligible employees enjoyed a tax exemption on up to 30% of their income for a maximum of five years.
From 1 January 2024, the facility is undergoing a phased transformation.
Initially, for 20 months, the tax-free allowance remains at 30%.
Subsequently, it reduces to 20% for the next 20 months and finally drops to 10% for the last 20 months.
Transitional arrangements
Transitional arrangements benefit employees already under this regime as of December 2023, including those who began working in the Netherlands before the year-end.
This provides some continuity amid these sweeping changes.
End of the partial non-resident Dutch tax regime
The partial non-resident Dutch tax status, an option under the 30% ruling, allowed expatriates to avoid Dutch tax on non-Dutch source income.
However, from 1 January 2025, this benefit will cease to exist.
Those granted the 30% ruling by 31 December 2023 can still enjoy this status until the end of 2026, thanks to transitional provisions.
Cap on the 30% facility and actual expenses
Another significant change is the introduction of a cap on the 30%-facility, effective from 1 January 2024.
The tax-free allowance is now limited to 30% of the 'WNT-standard'—a standard linked to top salaries, which is €233,000 for 2024.
For employees granted the 30% ruling in December 2023, this cap will be delayed until 1 January 2026.
Post the revision, as the tax-free allowance shrinks, considering reimbursement of extraterritorial expenses beyond the capped amount might be more beneficial than relying solely on the 30%-facility.
Adapting to the new framework
These changes necessitate a thorough review of compensation packages for expatriate employees.
It's essential for employers and expatriates alike to understand these evolving rules to optimize tax benefits and ensure compliance with Dutch tax laws.
Netherlands expatriate employees - Conclusion
While the Netherlands continues to attract global talent, the revised tax regime calls for proactive planning and adaptation to the new fiscal environment.
Final thoughts
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