From the Netherlands: Dutch 30% facility about to change?
Sam Abbing and Linda Groenewoud - Andersen Tax & Legal, the Netherlands, a Member Firm of Andersen Global
Anyone that is familiar with Dutch taxation must have heard about the 30% facility. This facility basically entails a 30% reduction of taxable income for foreign workers that are assigned to the Netherlands, provided certain conditions are met. The 30% that is deducted from the taxable income can be paid out on a tax-free basis, as a compensation for the (assumed) expenses triggered by the Dutch assignment. This facility is very popular with both employers and employees considering a Dutch working period.
In 2016, questions were raised with regard to the 30% facility in order to assess whether this facility is still functional for the purpose it was initially introduced for, namely attracting highly skilled workers, contributing to an attractive climate for businesses and reducing the administrative burden for employers. As a result, the Dutch State Secretary of Finance requested the 30% facility to be evaluated by an independent external evaluator. Recently, the evaluation report was published, concluding that the 30% facility is still functional for its purpose. However, the following changes are suggested in the report in order to make the 30% facility more sustainable and acceptable going forward:
- Reduce the duration for application of the facility from (currently) eight years to five or six years;
- Increase the current 150 km condition, implying that the distance between the place of origin of the assigned worker and the Dutch border should be in excess of the current threshold of 150 km;
- Reduce the flat rate (currently 30%) for that part of an annual gross income that exceeds € 100,000.
The State Secretary of Finance has sent the evaluation report to the Dutch Parliament, also given the fact that currently a new government is being formed after recent elections. In view of the formation of that new government and the Dutch 2018 state budget being topics of the political debate at short notice, we can not exclude that the 30% facility, as we currently know it, will remain unchanged.
Thus, when employers and/or employees are currently considering an assignment to the Netherlands, we suggest not to wait but act now ensuring access to the current benefits of the facility to the best extent possible. Earlier changes to the 30% facility were always supported by transitional rules protecting existing situations from any new rule being introduced. Under the assumption that this policy is respected in case of potential changes, timely requests for application of the 30% facility for new assignments will result in a longer and more beneficial outcome.