The Netherlands 2012 budget: Impact on expats
"Prinsjesdag" is the day the Dutch government announces next year's budget and changes. Finsens Financial advisers highlight the tax changes which affect expats in the coming year and beyond.Changes in the 30 percent ruling
The state secretary has announced some changes to the current 30 percent ruling. The following restrictions will be introduced:
- The "specific knowledge" requirement will be backed by a minimum salary requirement of EUR 50,600. Please note that this minimum salary requirement refers to the taxable salary; therefore a salary of approximately EUR 73,000 inclusive of tax free reimbursement is required;
- Periods of living and/or working in the Netherlands in the last 25 years will be deducted (previously the last 10 years were relevant);
- Dutch nationals have to have lived and worked abroad for at least 25 years to qualify as "being hired from outside";
- Anyone living within a 150 km radius from the Dutch (land)border will not qualify as "being hired form outside". Due to the wording, only employees hired from Germany and Belgium will be excluded.
On the other hand, the 30 percent ruling will be opened up for young PhDgraduates: the minimum salary requirements will be lower for them; EUR 26.605, again this refers to the taxable salary.
Furthermore, if they take on a job directly after having finished their PhD in the Netherlands, they will be deemed to be hired from outside the Netherlands.
The validity of 30 percent rulings granted before 2012 will remain unchanged. Please note however:
- that a change of employers may qualify as a new application, for which the new rules may apply;
- that the current regulations offer the tax authorities the option to check the status of the employee benefitting from the 30 percent ruling after five years have passed. The tax authorities may use this to deny the second five years of eligibility based on not meeting the criteria of the new regulations if the first five-year period has not already passed before 1 January 2012. The state secretary has indicated that the 25 year review period will not be applied in these cases, the other criteria newly introduced will be.
Self-employment deductions in income taxes
As a self-employed person, you are entitled to certain deductions, which lower the taxable base for income taxes. The current self-employment deduction is "degressive": the higher the income, the lower the deduction you are entitled to.
In addition to the self-employment deduction, an entrepreneur is entitled to the "small business deduction" of 12 percent of the gross profit.
In effect, a self-employed person starts paying income taxes above an income of approximately EUR 19,000.
In 2012, the self-employment deduction will be a fixed amount: EUR 7,280 per tax year. The "small business deduction" remains unchanged.
The reason for changing the set up of the self-employment deduction is the government's wish not to stimulate pressure on the lower-income end of the market to become self-employed rather than employed. Another reason is that the government states it wants to promote growth in business rather than penalize it.
Current salary savings scheme and life-course savings scheme abolished; new "vitality savings scheme" introduced
The current "salary savings scheme"(spaarloon) and "life-course savings scheme"(levensloop) will be replaced by the "vitality savings scheme" in 2013. This saving scheme is open to all employees and entrepreneurs.
Saving in an existing "spaarloon" scheme is no longer possible as of 1 January 2012. Savings can be made available in 2013 without any adverse tax consequences.
For participants in the life course scheme, a deposit in 2012 will still be possible. It is unknown what the transition legislation will look like as far as unwinding of the savings is concerned. It is clear, however, that participants who are aged 58 and over on 1 January 2013 can keep their life-course savings.
Both schemes will be replaced by the vitality savings scheme, in which deposits are tax deductible and are taxed when money is withdrawn. A maximum of EUR 5.000 per year can be saved. In total the savings can be no higher than EUR 20.000. This is also the maximum withdrawal in a year.
If the participant is aged 62 or older, a maximum of EUR 10.000 per year can be withdrawn. This limitation is meant to discourage early retirement.
By Finsens Financial advisers.