Dutch Expatriate Regime Improved From 2001

by Ulrika Lomas, Tax-news.com, Brussels

09 April 2001

The Netherlands has changed its special fiscal regime for expatriates. Non-residents of Holland who are offered employment by a resident Dutch entity have been able to apply for preferential income tax treatment which if granted by the ministry of finance will result in 35% of the applicant's earnings being tax free.

The chief condition which the employee must satisfy is that he has some specific expertise which is not readily available in Holland, but this is normally deemed to be the case for an employee of a multinational corporation.

With effect from 1st January 2001 the 35% allowance is reduced to 30%; however the top Dutch tax rate was reduced to 52% from 60% on the same date so that the effective top rate for qualifying expatriates under the new rules is 36.4% as against 39% previously. Other improvements include exemption from 30% of social security tax as well as income tax, and tax-free reimbursement of school fees for expatriates' children.

The preferential treatment is available for a period of up to 120 months. After 4 years the employer must prove that he still cannot get a local employee with the expatriate's specific expertise whereupon the preferential fiscal status will continue for another 6 years.

If the employee has lived in the Netherlands prior to the application then this period of residence will be deducted from the 10 year period. If the expatriate employee changes employer he will have to re-submit his application and establish that the criteria of unavailable specific expertise still applies.

Expatriates already benefitting from the existing 35% regime will be automatically switched to the new 30% regime for the remaining period of their exemption.

Recommended