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  • Tag Archive: employment taxes

    1. Netherlands revamps tax incentives for expatriate employees

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      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

      If you have any queries about this article on Netherlands expatriate employees, or Dutch tax matters in general, then please get in touch.

    2. Proposed overhaul of employment taxes in Bermuda

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      Introduction

      Earlier in the month, in the Pre-Budget Report (“PBR”), the Bermudan Government announced a proposal that will represent significant changes to the current employment tax regime.

      Changes proposed for Exempted Companies

      It is a fair observation to say that some of the proposals were quite eye-catching.

      Firstly, an increase is proposed to the employer portion of payroll tax for exempted companies. Here, the rate will increase from the current 10.25% to 10.75%.

      The result of this is that it means that Bermuda’s exempted companies are now required to pay payroll tax at a higher rate than local companies.

      Changes proposed for higher earners

      In addition, the PBR proposes a change to the employee portion of payroll tax. The result here is that it means a greater proportion of the overall tax burden will fall on the shoulders of higher earners.

      The Government had made election pledges in 2020 in this area. Firstly, it seeks to make good its promise to eliminate the employee portion of payroll tax for those earning below $48,000 a year. At present, this is 1.5%.

      This is accompanied by an increase in the rates for all other income brackets. These are set out below.

      Income bracketCurrent ratesProposed Rates
      $0 – $48,0001.50%0%
      $48,001 – $96,0009%10%
      $96,001 – $235,0009%11.50%
      > $235,0019.50%13%

      Raising the cap on annual taxable remuneration?

      The PBR also includes a proposal to increase the cap on annual taxable remuneration.

      At the moment, the cap is set at $900,000. However, the proposal suggests raising this to $1,000,000.

      Conclusion

      The measures set out above would result in high-earners shouldering a greater proportion of the tax burden.

      In addition, there is likely to be a sizeable increase in the payroll tax bill for exempt companies.

      In terms of next steps, the PBR will be open for consultation until 13 January 2023. A Budget will follow this – perhaps as early as February.

      So, watch this space!

      If you have any queries about this article on the Bermuda PBR, Bermuda employment taxes or Bermudan tax matters in general then please do not hesitate to contact us.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.