Living in the Netherlands but working abroad
Are you living in the Netherlands but working abroad? For many internationals, the corona crisis caused them to, or in some cases, gave them the opportunity to work remotely from abroad for their Dutch employer. For example, you could no longer return to the Netherlands after a visit abroad. Or this time of remote working gave you the opportunity to spend more time with your partner abroad and work from there. Or you went back to your home country to be closer to your family or just felt safer there.
Are you in a situation like this? Keep in mind that living in the Netherlands and working (from) abroad can have tax consequences. Your physical work location is very important from a tax point of view and determines where you have to pay income tax. In any case, it is important that you keep a close eye on how many days you work abroad in such a situation, including holidays. If people work abroad for more than 183 days, that country will also tax the income. The Netherlands should then grant double tax deductions in proportion to the days worked abroad.
Tax return consequences
If you were in the above situation or similar in 2020, please ensure that your 2020 tax return is filed correctly. Our specialized tax advisers can support you in this and ensure that you are not taxed twice or too little. The same counts for 2021. But in this caes you may still be in time to organize the situation in such a way that the tax consequences are minimal or the most favorable. By submitting your international work situation to us, you can make the best possible decisions.
Negative savings interest tips
Nowadays, more and more banks have a negative savings interest rate, already from € 100,000 on the savings account. So you no longer receive interest on your money in the savings account, but you have to pay a certain percentage on your savings for storing your money at the bank. There are several ways to avoid negative interest in savings:
1. Opening additional accounts: with some banks you can have multiple accounts at 1 bank and the accounts are not added together. At other banks, the amounts on different accounts at 1 bank are added together. Spreading your savings over several accounts can be difficult because the banks no longer open a new account for you so easily;
2. Investing: you can also invest your money; spreading it over many different investments is then advisable, as is engaging a good financial advisor. Depending on your desired risk level, your advisor can select and arrange the right investments for you;
3. Provide an interest-free loan to your child: you deposit your money up to a maximum of € 100,000 in your child’s savings account. To conclude a written loan agreement in which you indicate that the loan is intended to prevent negative interest at the bank and that you can always reclaim the money immediately. Extra option: If you pay your child the amount of negative interest saved as a contribution, this is tax-free for your child. Record this ‘interest amount’ in the loan agreement;
4. Loan to your own BV: do you still have room in the bank account(s) of your BV? Then lend your private assets to your BV. The condition is that you pay the BV more interest than the bank charges the BV. Your BV then makes a ‘profit’ and it is a matter of business conduct. You can deduct the interest paid by you to the BV in box 1 on the basis of the posting arrangement. In this case, too, you must record this in a loan agreement;
5. Loan from your BV to you: Do you still have room in your private account, while your BV has to pay interest to the bank? Then borrow money from your BV. The BV must then pay interest to you instead of to the bank. This interest is deductible for your BV. You will then have a ‘debt’ with your BV, but you will receive tax-free interest, which is also deductible for your BV. Your bank balance in box 3 will increase, but so will your debt, so on balance (almost), nothing will be taxed;
6. Establishing an OFGR or BV: if it concerns a significant amount of capital, setting up an OFGR or BV is also an option to avoid negative interest on savings and high box-3 levies. This is because this is based on the actual return instead of the box-3 tax, whereby an often unfavorable fictitious return is calculated. It might be though that there will be some changes, making an OFGR less favorable;
7. If you already intend to make a gift to your child(ren), the negative savings interest may be a boost. You could then possibly make use of the tax-free gift up to 100.000 euros for parents to their children to assist them in buying their first home.
8. Storing your money in a foreign account with better interest conditions can also be beneficial. Provided that you do report this money to the tax authorities. Otherwise, there is tax evasion. What you should definitely not do is a so-called ‘Inventive Construction’ abroad to disguise your wealth; this is outright tax evasion and may be punishable by law. The tax authorities are very alert to this and have a special program ‘Hidden assets’. So do not be tempted by malicious advisers who want to persuade you to such illegal construction.
Do you own box 3 assets above € 100,000? We are happy to look at tax options with you to prevent you from paying negative interest on a savings account.
Have you not declared assets to the tax authorities recently or in the past? Have you teamed up with an advisor who has set up an inventive construction for you (as described above)? Do you want to make a clean sweep? We are happy to guide you based on our many years of experience.
Collective ruling box-3 mass objection procedures 2017 to 2020
The Tax and Customs Administration has published the collective decision in the massive objection procedures against the box-3 tax for 2017 to 2020. All 200,000 objections have been declared well-founded. This does not mean that the participants in the mass appeal procedures now know how much they will get back and when.
There is also nothing known about possible compensation for other taxpayers who have paid too much box-3 levy. According to the cabinet, a box-3 levy based on the actual return cannot come into effect until 2025. However, urgent legislation is currently being worked on, which should provide a solution for the intervening years.
The emergency legislation makes adjustments to the existing box-3 legislation. The cabinet undertakes to send a memorandum of direction for the recovery operation to the House of Representatives before 1 April 2022. The left-wing opposition parties have already announced a private member’s bill that is based on a progressive levy on assets minus debts with a tax-free allowance of € 100,000 per person. The owner-occupied home remains in box 1 and substantial interest shares in box 2. The rate increases from 1% to 500,000 to 5% above € 5 million in taxable capital.
Tax assessments and tax return 2021
The ruling of the Supreme Court also has consequences for 2021 and later years. No final assessments are currently sent to taxpayers with box-3 capital. An exception is only made if there is a threat of prescription or if there is an interest in the taxpayer. As soon as it is clear what the recovery will look like, these attacks will be reinstated. Taxpayers will be informed about this.
The Tax and Customs Administration asks taxpayers to pay the provisional tax assessment 2022, pending further decisions. They are also asked to simply submit the 2021 tax return, stating the box-3 capital. Taxpayers with box-3 capital will probably receive their 2021 assessment later than 1 July 2022, even if they submitted their 2021 tax return before 8 April.
Supreme Court judgment on box 3 levy
As you may have heard in the press, the Supreme Court ruled on 24 December 2021 that the box 3 tax based on a fictitious return on investment in 2017 and 2018 is disproportionately high and is therefore in violation of the European Convention for the Protection of Human Rights (ECHR). The Supreme Court ruled that a relatively heavy financial burden is attached to the choice not to go into risky investment of assets. Furthermore, the fixed asset mix introduced in 2017 has a discriminatory effect on those who have had bad luck with their investments and nevertheless are taxed relatively heavily. That is why the Supreme Court offers legal redress in the sense that for the years 2017 and 2018 the tax should be based only on the actual return on investment. After the negative court decisions for earlier years, this finally means a positive outcome for the tax payer with saving accounts and hardly any interest.
Decision in mass appeal procedure
At the beginning of February, the Tax Office published the collective decision in the mass appeal procedures against the box-3 tax for 2017 to 2020. All 200,000 appeals have been allowed. This does not yet mean that the participants in the mass appeal procedures now know how much they will get back and when. Neither is anything known about possible compensation for other taxpayers who did not appeal against the box-3 levy. The cabinet has promised to provide a substantive response no later than 1 May 2022 on how restoration of rights can be offered over the past few years. For most situations involving a substantial box 3 tax, we have already raised appeals over the past few years. Further action is only meaningful after we know more about the promised response from the Tax Authorities.
New box 3 levy
According to the cabinet, a box 3 levy based on the actual return on investment cannot come into effect until 2025. However, emergency legislation to adjust the box 3 levy is currently being worked on, which should provide a solution for the intervening years. This could include, for example, fictitious interest rates that are more in line with the actual returns and based on the actual composition of the assets. The cabinet is planning on sending a memorandum of direction for the recovery operation to the parliament before 1 April 2022.
Moreover, it is clear that a new system will certainly not lead to advantages for all taxpayers. Taxing actual returns can also mean taxing capital gains from securities and real estate, which have not been taxed as such until now. Besides, a number of parties state that the coverage for the measures should come from the same category of taxpayers.
Future assessments and tax returns
The ruling of the Supreme Court has consequences for 2021 and later years too. No final assessments are currently sent to taxpayers with box-3 capital. An exception will only be made if prescription is imminent or if there is an interest in the taxpayer. As soon as it is clear what the recovery will look like, these assessments will be issued. Taxpayers will be informed about this.
The Tax Office asks taxpayers to pay the provisional tax assessment 2022. They are also asked to simply submit the 2021 tax return, stating the box-3 capital as before. Possible compensation will be worked out later. Taxpayers with box-3 assets will probably receive their assessment for 2021 after 1 July 2022, even if they have submitted their 2021 tax return before 1 April.
Is your 30% ruling ending?
For many expats the 30% ruling may cease by the end of this year as the transition period for those originally with an 8 year duration is discontinued. It is important to check the situation and possibilities to minimise the tax consequences.
Is your 30% ruling ending? Do you have worldwide assets? Contact us now to see what your tax saving possibilities are.
30% ruling end
Prior to 2019, the 30% ruling period was 8 years. As of January 2019 the period was shortened to 5 years. A two-year transition period was implemented lasting until January 1st 2021. This means that:
- For anyone granted the ruling between January 1st 2011 and January 1st 2013 the 8-years still count, ending between January 1st 2019 and January 1st 2021;
- those granted the ruling between January 1st 2013 and January 1st 2016 will be able to receive the allowance until 31 December 2020, giving them up to an additional two years following the extension;
- anyone granted the ruling after January 1st 2016 will be eligible for the 30% ruling benefit for 5 years
30% ruling is ending as of January 2021
This means that for many international workers their 30 % ruling is ending as of January 2021. If you are one of them, it is important to be well prepared for the consequences. Not only will your take-home salary become lower, but you will also need to start thinking about your wealth and what this will mean for your tax return.
Without the 30% ruling, you can no longer opt to be considered a partial non-domestic taxpayer. In other words, you will be treated as a full resident tax payer and you will need to state your worldwide assets in your Dutch tax return. It is important that you are well prepared for this change and seek tax advice.
“Take this example from an international from Greece who’s 30% ruling period will end January 1st 2021. From then on she will no longer be able to opt for non domestic taxpayer; that means she becomes taxable in the Netherlands for her worldwide assets. Since she has savings in Greece she will have to pay box-3 tax in the Netherlands. Our tax consultants can help her structure things in such a way to reduce her tax liability. One of the possibilities we would be looking at is to reduce her box 3 tax liability by using her savings to repay part of her Dutch morgage. Although in that case she would receive less mortgage relief it would als lead to reduction of payable mortgage interest. And she would have less savings and thus as a reduction in box 3 taxation.”
Tax on assets and foreign real estate
This year the threshold per individual is € 30,846 before the asset tax starts. Your assets of between €30,846 and € 103,643 are taxed at 0.54%; assets of between €103,643 and €1,036,418 will be taxed at 1.27%; and anything over that at 1.6%. Given these fixed amounts of tax are unrelated to the actual income your assets generate, the higher your income, the more tax efficient you are. But they are still amounts which have to be found and paid.
You also need to include foreign real estate in your tax return and request a deduction for double taxation. In most Dutch tax treaties, the taxation of real estate is always allocated to the country where the property is located.
Avoid a large fine
It is really important to be honest and fill in your tax form correctly. The Dutch tax office is particularly hot on foreign bank accounts, and you can be fined up to 300% of the unpaid tax if you forget to mention them.’
If you would like to find out more about maximising your tax efficiency and decreasing your risk of fines, please feel free to contact Suurmond Tax Consultants www.suurmond-taxconsultants.com .
Update 30 percent ruling Netherlands 2015
The last time the 30 percent ruling in the Netherlands was thoroughly revised was in 2012. The main changes considered the maximum period of 8 years instead of 10 years. Also expats have to have lived further than 150 kilometers away from the Dutch border during more than 16 months before their employment in Holland to qualify for the 30 percent ruling. Besides these alterations there is the change in the criterion. Before it was called the specific knowledge criterion, now it is basically a salary criterion, indicating that employees from abroad that have specific knowledge earn more. An exeption is made for younger persons with a master degree and those that receive their PhD in the Netherlands.
The past years these changes have raised many questions, especially the 150 kilometer rule. Especially if someone has had to move more than 150 kilometers it can be confusing if the application is denied. The Tax authorities are strict in applying the rule, 1 kilometer can make the difference. It could also be that you have moved 280 kilometers from Cologne (Köln) to The Hague, but do not apply for the 30 percent ruling because Cologne is less then 150 kilometers from the Dutch border.
The fact that you have to have lived abroad for 16 months raises a lot of questions. What if you have worked in a different job before in which the 30% ruling applied? What if you were travelling and it is not sure where your center of life was? Answers to these questions are sometimes hard to find and qualified tax advice is required.
With the salary criterion it is crucial that the qualifying salary of € 36.705,– or more (in 2015) is the taxable salary after the 30%-ruling has been applied. Make sure your employer or payroll agency applies the 30%-ruling correctly. We offer second opinion advice when your apllication is denied or when you have doubts about the procedure being correct or not. You cab also contact us if you want to know more about the 16 month period that you have to have lived abroad, since this often raises a lot of questions.
In case of unemployment
Last but not least we want to highlight that, if unfortunately this situation occurs, you need to make sure that you are not unemployed for longer than 3 months in between jobs. If you exceed this period you will loose your eligibility for the 30% ruling in the new job.