We review two recent court cases with implications for the 30 percent allowance ruling for expats.

Case I: supervisory board member

This is a case where a company and one of its supervisory board members applied for the 30 percent ruling.

The Belastingdienst (tax authorities) took the position that the 30 percent ruling could not be granted to this individual because under Dutch law statutory board members are working in a fictitious employment instead of a genuine employment.

The latter is defined as a business relationship in which the employee offers a service, receives payment and the employer is in a position of authority.

Under the old 35 percent ruling, which was based on a regulation from the Secretary of Finance, fictitious employment relationships were explicitly excluded from the 35 percent allowance ruling.

The 30 percent ruling replaced the 35 percent allowance ruling on 1 January 2001 in the Dutch Wage Tax Act. For the definition of what an employee is, the 30 percent allowance ruling refers back to the general definitions of an employee in the Wage Tax Act.

Since this general definition of an employee also includes employees in a fictitious employment, the tax court has now ruled that statutory board members can also qualify for the 30 percent allowance ruling.

This court case could lead to a situation where the 30 percent ruling cannot be denied to individuals working under a fictitious employment solely on the basis their activities do not constitute a 'genuine' employment.

This can, for example, relate to supervisory board members, trainees and individuals, assigned via a temporary employment agency.

It goes without saying that, in order to qualify for the ruling, these individuals also need to meet the other qualifying criteria, like being recruited from abroad, and having specific expertise that is not readily available in the Dutch employment market.

If an application for the 30 percent allowance ruling is now filed after all for an employee in a fictitious employment, the application will most likely not be filed within four months after the start of the Dutch employment.

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