What is the 30% facility?
The Dutch 30% facility is a tax advantage available to certain employees with specific expertise who are recruited from other countries to work in the Netherlands. If all the conditions for the 30% facility are met, the employees are exempt from paying tax on up to 30% of their salary (i.e. the 30% tax free allowance). This means that the employee only pays tax on the remaining part of the salary. This facility is granted to cover additional costs that are incurred as a result of working in the Netherlands, such as travel expenses, visa costs, additional housing costs and day-to-day expenses. There are a number of conditions that have to be met to be able to qualify for the 30% facility. These specific conditions and how to apply for the 30% facility will not be discussed in this article.
Does the employer or employee benefit from the 30% facility?
Negotiable benefits between employer and employee
When recruiting an employee from abroad, the 30% facility can be part of the employment negotiations. If the employer and employee agree on a gross salary, the benefit of the 30% facility will be for the employee. If the employer and employee agree on a net salary, the benefit will be for the employer. However, in both situations the 30% facility could be taken into consideration when determining the gross or net salary.
In addition to the 30% tax free allowance, the employer can also, free of tax, reimburse school fees for an international school or for an international department of an ordinary school for the employee’s children. This can be part of the negation on fringe benefits.
The 30% facility must be processed via the payroll. It is not allowed to take the 30% facility into account in the personal income tax return of the employee.
Personal benefits for the employee
Besides the benefits that may affect the net salary and salary negotiations between the employer and the employee, there are personal benefits for the employee as well. When filing the Dutch personal income tax return, if an employee has the 30% facility, the employee can opt for the partial non-resident tax status. When having opted for the partial non-resident taxpayer status, the employee is treated as a non-resident taxpayer for part of his/her income. The taxable income from a substantial interest (box 2) and the taxable income from savings and investments (box 3) will, for income tax purposes, be determined according to the regulations that apply to non-resident taxpayers. In practice, this means that, in these boxes, tax is only levied on a substantial interest in a Dutch company or real estate located in the Netherlands. As a result, the employee pays less tax.
Additionally, the employee can also exchange his or her foreign driving licence for a Dutch one (without taking a driving test!) if the employee has the 30% facility, regardless of the country of origin.
What are the recent changes in legislation?
The most important recent change is that the maximum term of the 30% facility has been reduced from 8 to 5 years as of the 1st of January 2019 for new and existing 30% facility grants. All exiting 30% facility grants will end 3 years earlier than mentioned on the 30% facility grant letter.
Transitional rules have only been agreed for the 30% facility grants that end in 2019 or 2020. The Dutch tax authorities have informed employers and employees with the 30% facility of the aforementioned changes in writing.
What is the new end date of the 30% facility?
|The end date on the grant letter states:||The new end date is:|
|2019 or 2020||The end date on the grant letter (no change)|
|2021, 2022 or 2023||31st of December 2020|
|2024 or later||The end date on the grant letter (issued before 2019) minus 3 years|
What are the reasons for the shorter duration?
The 30% facility is evaluated by an independent consultancy bureau (Dialogic) on request of the Dutch government in 2017. The conclusions of the evaluation were as follows:
- 80% of the employees use the facility for 5 years or less;
- The majority of the remaining 20% stay for a longer period in the Netherlands (not temporarily);
- In other countries with a comparable facility, the tax facility is often available for a period up to 5 years;
- The additional costs that the 30% facility is intended to cover reduce over time;
- A shorter 30% facility is less expensive but is almost as effective.
What happens when changing jobs?
Employees who have been granted a 30% facility for their current job, and who are changing companies, may continue the 30% facility with the new employer. The new end date as indicated in the above table will apply in the new position as well, provided that a new request for the facility is requested by the new employer and employee and granted by the tax authorities.
What are the required actions?
Employers need to be aware of the adjusted end dates and inform the payroll administrators accordingly. Furthermore, it is recommended to discuss the situation with the concerned employees, to get the consequences clear and be on the same page about the future. A point of attention are mortgage agreements the employee may have based on the higher net income.
As the 30% facility has changed often in the recent years, it is advisable to take into consideration that it might change again in the (near) future.