On 29 January 2016 the Dutch Supreme Court concluded that cross-border workers may not apply the 30%-ruling to the Belgian part of their wages when invoking the compensation rule under the tax treaty between Netherlands and Belgium, and that the 3 month period between employers can only be extended under exceptional circumstances.
Compensation rule: Tax treaty Netherlands-Belgium
The 30%-ruling is a fiscal facility for foreign employees who have specific skills or expertise, which are scarce in the Dutch labour market, who come to work in the Netherlands and who meet certain other conditions. Under Dutch law, expatriates working in the Netherlands may be entitled to tax-free compensation equal to roughly 30% of their gross remuneration.
The Netherlands-Belgium tax treaty provides a compensation scheme for residents of the Netherlands who (also) work in Belgium and who are faced with a higher tax burden in Belgium and/or the loss of the advantage of deductible expenses. The compensation value is the difference between the combined Dutch and Belgian tax and social security contributions that are actually due, and the Dutch tax and social security contributions that would be due if the wage was earned and taxed in the Netherlands.
In a case brought by a resident of the Netherlands, who worked in the Netherlands and Belgium and applied the 30% facility, the Supreme Court ruled that the 30%-ruling could not be applied to the Belgian part of the wage in determining the compensation value.
This follows the conclusion of the Advocate General on 29 September 2015 (see article here), and means that in the calculation the Dutch tax due will be higher, and consequently the disadvantaged amount to be compensated will be lower.
Changing employer: 3 month period
If an employee who is entitled to the 30%-ruling changes employers, the 30% facility can be continued with the new employer subject to certain conditions. One of these conditions is that the period between the end of employment and the start of new employment is not more than three months. If this period is longer, the scarce, specific expertise argument is compromised.
A certain employee, who could not find a new employer within the period of three months (partly due to personal reasons), believed that a longer period should apply under certain circumstances. The argument was that the period of three months was only an indication and that the 30%-ruling could be continued if the scarce and specific expertise of the employee could be proved in other respects. On 29 September 2015 the Advocate General concluded that an exception to the period of three months can only be made in unique cases, for example if the employee was not able to search for a new job for some time due to uncontrollable events. It was established that this was not the case in these particular proceedings.
The Supreme Court agreed with the Court of Appeals and the Advocate General that the 30%-ruling provides no other way to support the claim that the interested party has scarce, specific expertise. Due to this, the interested party is not entitled to a continuation of the 30%-ruling.
What does this mean for my business?
Case law again confirms that the 3 month period is a strict limit. Special attention should be given to the start date of any new employees who fall within this requirement. In some cases, expert advice may be required when determining the 3 month period, especially if the employee ends his former job with a period of garden leave.
ECLI: NL: HR: 2016: 116 (Dutch)
ECLI: NL: HR: 2016: 129 (Dutch)
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.