2 (2)

Reduction of the 30% ruling benefit in the Netherlands starting from 2024

What does the 30% ruling entail?

The 30% rule is a tax scheme that allows, under strict conditions, up to 30% of the salary to be tax-free for employees hired from abroad. These employees typically face additional costs known as extraterritorial costs.

  • You are a salaried employee. You were hired outside the Netherlands by a Dutch company.
  • You have specific or highly qualified expertise that is either scarce or in low supply in the Dutch job market, meaning you are considered a skilled migrant.
  • Reside more than 150km from the Dutch border for more than 16 out of the 24 months preceding your first working day in the Netherlands.
  • Workers from Belgium and Luxembourg, for example, are excluded from the scheme in any case.
  • If you want to apply for the scheme from the first working day, make sure that the Dutch tax authorities (Belastingdienst) receive the application to apply for the scheme within four months after the first working day.
  • The taxable income of an employee must exceed 46,107 EUR gross per year (in 2023, the figure was 41,954 EUR).

  • For an employee under 30 years old with a master’s degree, their taxable income must be higher than 35,048 EUR gross annually (in 2023, it was 31,891 EUR).

  • The application will be limited to a maximum salary of 233,000 EUR, determined by the High Incomes Standard Act (WNT standard), also known as the Balkenende standard.

  • This standard establishes a maximum salary limit to which certain tax benefits, such as the 30% ruling, can be applied.

  • Recently, the Dutch parliament approved significant changes to the 30% ruling regime. It should be noted that currently, an employee can receive a tax-free reimbursement of 30% of their gross salary for 5 years.

  • On October 26, 2023, the Dutch House of Representatives recently decreased the 30% ruling in the Tax Plan 2024 in two additional aspects:

Progressive reduction of the 30% ruling:

  1. Starting from 2024, the updated regulations will no longer guarantee a total reimbursement of 30% over the 5-year period (60 months). The plan will allow its unchanged application during the first 20 months, enabling the payment of 30% of the gross salary as a tax-free expense reimbursement. During the next 20 months, you will only be able to receive 20% of the gross salary tax-free, and in the last 20 months, only 10% tax-free.

2. From 2025, expatriates will be obliged to pay taxes in boxes 2 and 3, even for those currently benefiting from the 30% ruling.

“Box 2” in the Dutch tax declaration focuses on income generated from shareholdings in a company, such as dividends and profits derived from the sale of shares in a company.

“Box 3” includes declarations of balances from bank accounts, investments, and real estate inside and outside the Netherlands, excluding the main residence.

Please note that Changes 1 and 2 have been approved by the Parliament but are still subject to Senate approval. However, it is expected that this will happen in the future.

  • Instead of applying the 30% ruling, an employer has the option to reimburse actual extraterritorial expenses incurred by an employee if this proves more beneficial.
  • To make use of this alternative, the employer must be able to demonstrate the actual occurrence of these costs, and furthermore, they must be individually recorded in the payroll administration.
  • Opting for the reimbursement of current extraterritorial costs can be an excellent choice for future expatriates whose costs exceed the 30%/20%/10% of their gross salary. The decision to reimburse these actual extraterritorial expenses must be made in the first payroll period of the calendar year and applied for the entire year.
  • From the year 2024, more stringent requirements will be implemented for the 30% ruling regime, allowing employers to pay a portion of the salary tax-free under specific circumstances.
  • These adjustments aim to simplify the system but, at the same time, establish specific salary limits.
  • The changes in the regulation of the 30% ruling in the Netherlands have a substantial impact on expatriates and their employers, influencing both tax responsibilities and payroll management.
  • According to calculations, it is expected that the savings resulting from these modifications will increase from 3 million euros in 2025 to a substantial amount of 194 million euros in 2029 and beyond.
  • The proposal involves using the freed-up funds to decrease student loan interest.
  • As a consequence of these changes to the 30% ruling regime, employees will face higher personal income taxes.
  • This situation will not only increase the tax burden on expatriates but will also significantly complicate their tax declarations.

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prinsjesdag 2023

Main tax measures announced in Prinsjesdag 2023 Benefits for self-employed and personal

(A) Taxes

Prinsjesdag 2023 is an annual event in the Netherlands marked by the King WillemAlexander  speech presenting government policies and plans for the next year. This day also includes the royal procession and is crucial for setting the political and fiscal agenda in the Netherlands. On September 19, 2023, the government presented its policy proposals for the coming year.

Do you sell beer, wine, or other alcoholic beverages? The special tax on beer, wine, and other alcoholic beverages will increase by 16.2% starting January 1, 2024.

  • The price of a case of beer will increase by €0.50. That’s €0.02 per bottle.
  • A bottle of wine will become more expensive by an average of €0.13.

For whom?

  • Alcohol sellers
  • Alcohol producers
  • Alcohol importers

The SME profit exemption for small and medium-sized enterprises will be reduced in 2024. Are you self-employed or an SME entrepreneur? Are you considered a business entity for income tax purposes? You will pay more taxes in 2024 on the profits you have earned. Then, subtract 12.7% of the SME profit exemption from your income tax return. This used to be 14%.

For whom?

  • Self-employed individuals and SME entrepreneurs who pay income tax and, therefore, have a legal form without legal personality (e.g., sole proprietorship, general partnership, limited partnership)

Are you entitled to the self-employed deduction? The amount you can deduct from your earnings has been decreasing each year since the law changed in 2022. In 2023, the self-employed deduction will be €5,030. In 2024, the self-employed worker’s deduction will be reduced to €3,750. You pay more taxes if the self-employed deduction decreases.

The amount of the self-employed deduction in the following years is as follows:

  • 2024: 3.750€
  • 2025: 2.470 €
  • 2026: 1.200€
  • 2027: 900€

For whom?

  • Self-employed workers eligible for the self-employed deduction

What’s changing?

Are you a business entity for income tax purposes? The discount on the payment of provisional Income Tax (ib) will disappear. You will no longer receive a discount if you pay your provisional tax settlement in a lump sum (instead of in instalments) before the final payment date of the first payment period. This change is expected to take effect on January 1, 2024.

The tax-free travel allowance will increase from €0.21 to €0.23 per kilometre on January 1, 2024.

Are you self-employed? Then you can deduct this amount per kilometre from your earnings if you are a business entity for income tax purposes.

Are you an employer? You can reimburse employees’ travel expenses tax-free. This also applies to travel expenses on public transportation. And for taxi, boat, or plane expenses. As long as this is reasonable.

You can grant your employees a tax-free travel allowance exceeding €0.23 per kilometre. This additional increase is considered the employee’s salary. You can designate the additional increase as a final wage rate through the labour cost system (WKR). This way, the additional increase becomes tax-free.

The tax-free travel allowance is not for entrepreneurs who reimburse their employees for the cost of a company car or bicycle.

For whom?

  • Employers reimbursing their employees’ travel expenses
  • Self-employed individuals using travel expenses as a deductible expense

What’s changing?

Do you sell non-alcoholic beverages such as soft drinks and fruit juices? The consumption tax on these beverages will increase. Starting January 1, 2024, the consumption tax on these non-alcoholic beverages will increase to €26.13 per 100 litres (hectolitre).

As of January 1, 2024, mineral water and milk will no longer be included in these non-alcoholic beverages. There will be no consumption tax on mineral water and milk from that date.

For whom?

  • Entrepreneurs selling non-alcoholic beverages, such as soft drinks and fruit juices
  • Entrepreneurs selling mineral water and milk

What’s changing?

Are you a business entity for income tax purposes? The tax rate for Box 3 Income Tax will increase from 32% to 34% starting January 1, 2024. This is one year earlier than initially proposed. The rate in 2024 would initially be 33%. In 2025, it will remain at 34%.

The tax-free threshold for Box 3 will remain at €57,000 in 2024. For fiscal partners, it’s €114,000. The tax-free deduction would first increase (indexed) to €62,643.

For whom?

  • Entrepreneurs for income tax
(B) Personal

What’s changing?

Are you an employer? And are you hiring a foreign employee with special skills or knowledge? You can no longer reimburse the additional costs your employee incurs due to the tax-free move to the Netherlands indefinitely. Starting now, you will also need to report each year to the Tax Authorities how you want to reimburse these extraterritorial costs.

This is an adjustment to the current 30% rule. Soon, you can reimburse the costs by paying 30% of the tax-free salary. The compensation itself is included in that 30%. There is no need to specify the costs your employee has actually incurred.

Starting January 1, 2024, there will be a maximum amount for this option. You can reimburse the costs up to a maximum of 30% of the Higher Incomes in the Public and Semi-Public Sector Act (WNT) for higher salaries. This amount is determined each year.

Your employee must meet the conditions of the 30% rule. And you must register your employee with the Tax Authorities as a user of the 30% facility.

For whom?

  • Employers allowing a foreign employee with special skills or knowledge to come to the Netherlands. This change is expected to take effect on January 1, 2024.
(C) Childcare

What’s changing? Do you work in childcare? Childcare can be offered in various languages. Multilingual childcare in German, English, or French will be allowed. A maximum of 50% of daily care time can be provided in a multilingual setting.

For whom?

Entrepreneurs working in childcare. This change is expected to take effect on January 1, 2024.

(D) Tax Plans for Sole Proprietorships

Your income in Box 1 is taxed in two brackets. In 2024, you will pay 36.97% income tax on your earnings up to €75,624. This is 0.04 percentage points higher than in 2023. Next year, just like in 2023, you will pay 49.5% income tax on your income over €75,624. AOW beneficiaries are subject to an adjusted first bracket.

In previous years, the bracket limits increased with the inflation rate. This year, the increase is 3.55%, which is less than the inflation rate of 9.9%. This means that you are more likely to pay the higher tax rate in the second bracket.

If you own 5% or more of a company’s shares, you have a “substantial interest.” You may receive a profit distribution or dividend. In 2023, you paid a tax rate of 26.9%. In 2024, dividends received from a substantial interest will be taxed in a two-bracket system. You will pay 24.5% income tax on earnings up to €67,000. Beyond that, the rate is 31%.

In 2024, you will pay less tax in Box 2 for-profit distributions up to approximately €106,000. You will pay more tax for larger profit distributions in 2024 than in 2023. It may be interesting to distribute saved profits from your company in 2023. Consult with your advisor. Note that after receiving a dividend, you will have private money and investments. This becomes capital in Box 3. In Box 3, there is a tax-free capital of €57,000. If the value exceeds this exemption, you will pay tax on it in Box 3. Consult with your advisor about the best course of action in your situation.

Do you have savings or investments? Then you will not pay tax on your wealth up to €57,000 in 2024. If you have more, you will pay 34% tax on the returns you have obtained. Returns refer to the yield from savings and investments. The government calculates a fixed return rate for investments at 6.04% in 2024. The return on savings is determined later. As of January 1, 2023, money in third-party accounts with a notary or bailiff also counts as savings. This also applies to owners’ participation in the assets of a homeowners’ association (VVE).

Debts are also included in Box 3. The costs of your debts are deducted from the yield of your assets. The costs of your debts are charged at a fixed interest rate. You cannot deduct a fixed amount from your debts. That is the debt threshold. The debt threshold and interest rate will be determined later.

From 2024 onwards, it will no longer be necessary to declare mutual claims and debts between fiscal partners or between parents and minor children.

The SME profit exemption is reduced. The SME profit exemption reduces your taxable profit after business deductions. The percentage will decrease from 14% to 12.7% in 2024. Entrepreneurs with high profits will be affected the most.

Do you work at least 1,225 hours in your business? Then you are entitled to the self-employed deduction. The self-employed deduction will be reduced by €1,280 in 2024, resulting in a deduction of €3,750. In the coming years, the self-employed deduction will continue to decrease to €900 in 2027.

The tax-free travel allowance will increase from €0.21 to €0.23 per kilometre on January 1, 2024. As an entrepreneur, you can deduct this amount from your business travel expenses for using your private car, motorcycle, or bicycle. As an employer, you can also reimburse your employees at the rate of €0.23 per kilometre tax-free for business trips using their own mode of transportation, including daily commutes.

Source: KVK (Chamber of Commerce), Belastingdienst

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PSM-VIDEO-Income tax PORTADA

Income tax return (Inkomstenbelasting) and tax deductions

It is the tax paid on income received during a fiscal year, which begins on January 1 and ends on December 31; whether it is income from employee, self-employee, other income, etc.

 

INCOME TAX RETURN

 

Do I have to file the Dutch Income Tax return?

If you received a declaration letter from the Dutch Tax Authorities (Belastingdienst), you are obliged to file the income tax return on the date mentioned in the letter, otherwise you will receive a fine for not doing it on time. In general, the letter may mention that you must send the declaration between March and April of the year to declare.

 

What happens if you did not receive the declaration letter, then do I have to declare the income tax return?

If you did not receive the invitation letter, but you must pay more than 49 euros in taxes (reference for the year 2021) in the income  tax return, you are obliged to send the declaration. However, you have up to 5 years to send it. 

 

What type of declaration form applies to me?

There are different types of tax forms: M, P, C and F-Form, if you wnat tio know which one corresponds to you, check the following link:: 

https://psmconsultancy.nl/en/2022/07/15/4-types-ducth-income-tax-forms/

 

When should I file the income tax return?

The income tax return must be sent between March and April, of the year following the one you wish to declare. If they have sent you a declaration letter with a deadline, you must meet that date mentioned in the letter, otherwise you will be fined for filing late.

 

How long can it take until I have an assessment of income tax return?

If you send your income tax return within the stipulated time, between March and April, on average you can receive a response before July of that year. But, if you send your income statement outside of those dates, the resolution of your declaration may take up to 36 months.

 

TAX DEDUCTIONS FOR INDIVIDUALS

– From income tax return 2022, study costs and other educational expenses are no longer deductible. You can check if you are eligible for the STAP Budget, check the following article about the different types of subsidies: https://psmconsultancy.nl/en/2022/07/21/types-allowances-netherlands/

If you are self-employed, nothing will change for you, study expenses are business expenses, so you can still deduct them from your company.

– If you incurred many illness or disability costs in 2021, health care costs are only deductible, only if they are above the limit amount.

– If you bought a house for the first time, you should consider the expenses for contracting a mortgage, mortgage interest or loans, periodic land lease payments, etc.

– If you go to work by public transport, you can deduct your travel expenses if you meet certain conditions.

– If you pay alimony for your ex-partner.

– Donations to most charities are deductible

 

DEDUCTIONS FOR SELF-EMPLOYED

 

– Hour criterion: if you work at least 1,225 hours a year for your company.

– Business expenses.

– Small-scale investment deduction.

– Initial deduction.

– Exemption of earnings of SMEs.

 

 

Source : Belastingdienst

We have more than 10 years of experience.

Advisors specializing in tax treaties and specialized in Dutch tax matters.

We have the first online platform in English, where the client can review their information and declarations sent to the Belastingdienst

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Tax Advisor

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PSM-VIDEO-What documents to have for income PORTADA

What documents must to have for the Dutch income tax return?

We have listed them below, per category:

 1. Individuals

a) Personal details

  • Your citizen service number (burgerservicenummer, bsn), if applicable, those of your partner and children.
  • Your bank account details (IBAN, preferably a Dutch bank account).
  • Your telephone number.
  • Your home address details.

b) Income (worldwide)

  • Your annual payslip (jaaropgaaf 2023).
  • Your annual income statements for 2023 for other countries

c) Bank account details (Dutch and foreign bank accounts)

  • Your current account annual statement 2023.
  • Your savings account annual statement 2023, as well as the annual statement of the savings accounts of your children under 18 years of age.
  • Your investment account annual statement 2023.

d) Property

If you are considered a ‘non-resident tax payer’:

  • Your own home’s WOZ value on 1 January 2022
  • You’ll find this value on last year’s municipal WOZ assessment or in the following website https://wozwaardeloket.nl/.
  • Your mortgage’s annual statement 2023.
  • In case of purchase or sale of your house: the final settlement from your notary.

If you are considered a ‘qualifying non-resident tax payer’ or if you are covered by Dutch social insurance, you will also need your foreign home’s details:

  • The value of your foreign home.
  • Your foreign home’s mortgage annual statement 2023.

e) Deductions (only if you are a ‘qualifying non-resident tax payer’, or if you were living in Belgium, Surinam or Aruba, or if you were covered by Dutch social insurance)

  • Gifts.
  • Costs for care which were not covered
  • Your own Healthcare Insurance Act contribution. Non-deductible items are: private care insurance premium and any deductible excess.
  • Paid partner alimony
  • Costs for study, in case you were not entitled to any study loans or grants (until income tax 2022)

f) Other (only if you are a ‘qualifying non-resident tax payer’, or if you were living in Belgium, Surinam or Aruba, or if you were covered by Dutch social insurance)

  • Details of grants or loans for study costs
    Details of other loans or debts (until income tax 2022)
  • Details of paid premiums for annuities.
  • Overview of paid premiums for occupational disability insurance.
  • Details of dividend.

g) When applicable:

  • Provisional assessment income tax 2023.
  • Provisional assessment income dependent
  • Health Insurance Act contribution 2023. 

 

2. Self-employed (eenmanszaak)

  • VAT tax declaration reports (BTW – Omzetbelasting) for 2023.
  • Bank statement of the company (Jaaroverzicht 2023)
  • Income tax return for the previous year (Inkomstenbelasting 2022)

 

Fuente: Belastingdienst

 

We have more than 10 years of experience.

Advisors specializing in tax treaties and specialized in Dutch tax matters.

We have the first online platform in English, where the client can review their information and declarations sent to the Belastingdienst

Patricia Santa Cruz
Tax advisor

PSM Consultancy, an online tax services in English, specializes in providing income tax and VAT services for individuals and the self-employed, in addition to making requests for subsidies in the Netherlands.

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PSM-VIDEO-4 types of income tax PORTADA

What are the 4 types of income tax forms in The Netherlands and which one corresponds to me?

There are four types of income tax return forms in the Netherlands:

 

M-FORMThis form is used to declare income, the year in which the declarant arrives or leaves the Netherlands.

For this, the document of registration or cancellation of resident in the Municipality (Gemeente) is essential.

 

P-FORM: It is the form for residents and is used to declare the rent when a whole calendar year has passed, from January 1

to December 31, in the Netherlands, that is, when you have remained registered with your local council (Gemeente) for this entire period with a Dutch address.  You must declare income, properties, bank accounts, shares inside and outside the Netherlands. You must review the tax treaties of the country in which you have the assets.

 

C-FORM: If you registered with the Municipality (Gemeente) throughout the calendar year, from January 1 to December 31, as an RNI (non-resident), i.e. with an address outside the Netherlands, then it is up to you to declare with this form. You must declare Dutch source income.

 

F-FORM: It is the declaration form for the year of the person’s death. The Belastingdienst (tax agency), will send it to the correspondence address you have in use, to contact the next of kin. The debts, income or assets are transferred to the relative of the deceased person.

 

Income tax return will be file between March 1 to April 30 of each year. 

 

 

Source : Belastingdienst

We have more than 10 years of experience.

Advisors specializing in tax treaties and specialized in Dutch tax matters.

We have the first online platform in English, where the client can review their information and declarations sent to the Belastingdienst

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Tax Advisor

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13. PSM-VIDEO-Inkomstenbelasting INGLÉS PORTADA v2

Do I need to file Dutch income tax return?

All people who reside in the Netherlands and have some type of income must present the income tax return.

 

WHEN DO I FILE THE INCOME TAX RETURN?

The income tax return must be sent between March and April, of the year following the one you wish to declare, in the Netherlands the fiscal year is considered from January 1 to December 31.


The following must be taken into account, if you received an invitation letter from the Dutch Tax Authorities (Belastingdienst), it is

obliged to make the income tax return on the date mentioned in the invitation letter, otherwise you will receive a fine for not doing it on time.

 

WHAT IF I HAVE NOT RECEIVED A DECLARATION LETTER?

If you did not receive the invitation letter from the Tax Agency (Belastingdienst), but you have had income during the year 2022, you are obliged to make the income statement if you must pay more than 49 euros in taxes in said statement. You must send the statement between March 1 to April 30, 2023.

 

HOW LONG CAN IT TAKE UNTIL I HAVE AN ANSWER?

If you send your income tax return within the stipulated time, between March and April, the average for receiving a resolution of the

statement is from 3 months to 1 year. If you send your income tax return after the stipulated time, that is, after April of the year following the year you are filing, the resolution of your statement may take from 1 to 3 years.

 

Source : Belastingdienst

 

We have more than 10 years of experience.

Advisors specializing in tax treaties and specialized in Dutch tax matters.

We have the first online platform in English, where the client can review their information and declarations sent to the Belastingdienst

Patricia Santa Cruz
Tax Advisor

PSM Consultancy, an online tax services in English, specializes in providing income tax and VAT services for individuals and the self-employed, in addition to making requests for subsidies in the Netherlands.

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