06


PLANNING OPPORTUNITIES

In most cases the partial non-resident taxpayer status is advantageous for the employee.

6.1 RESIDENT EMPLOYEES

Under the 30% ruling, a Dutch resident employee may elect to have ‘partial non-resident taxpayer’ status. This choice can be made each tax year and can be changed on a year-by-year basis. With partial non-resident taxpayer status, for ‘Box-1’ income (business profits, income from employment, and income from owner-occupied property) the employee is considered to be a Dutch resident taxpayer. However, for ‘Box-2’ (substantial interest) and ‘Box-3’ income (savings and investments), the employee is considered to be a non-resident taxpayer. As a result, investment income, for example, will not be subject to Dutch taxation, except for income from Dutch sources, such as Dutch real estate (i.e. a second home). The employee may still claim personal deductions, such as alimony and annuity payments, though. Fiscal partner regulations, such as optimal allocation of certain deductible costs, are not affected by this choice. Foreign withholding taxes on Box 2 and Box-3 income cannot effectively be credited against Dutch tax.

US nationals residing in the Netherlands who have elected to have partial non-resident taxpayer status are considered to be US residents for tax-treaty purposes. One of the consequences of this is that they do not have to report their worldwide income from employment in Box 1, but only the income related to the employment activities physically carried out in the Netherlands.

Lastly, an employee electing to have partial non-resident taxpayer status must do so while the relevant tax assessment is still open for appeal, but preferably already when filing the Dutch personal income tax return. In most cases the partial non-resident taxpayer status is advantageous for the employee.

6.2 PENSION

An employee who participates in a Dutch pension scheme can accrue pension rights over his/her pensionable salary, including the 30% allowance. The Dutch wage tax facility for pension contributions will then apply: the employer’s contribution remains tax free, and the employee’s contributions remain tax deductible.

Please note that the employee’s tax deductible pension contribution while participating in the company pension plan affects the taxable wage of the employee. Since the taxable wage has to meet the salary threshold at all times (see 1.3), the employee may consider waiving his/her pension rights in order to increase his/her taxable salary and remain eligible for the 30% ruling,. As an alternative to pension rights, in this case the employee may be better off with a life annuity.

6.3 NET SALARY AGREEMENT

The 30% ruling may also apply to net salary and tax equalisation agreements, in which case the 30% ruling would result in a substantial reduction of the employer’s costs

Under the 30% ruling, a Dutch resident employee may elect to have ‘partial non-resident taxpayer’ status.

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