HLB Van Daal & Partners is a member of HLB International. A world-wide network of independant accounting firms and business advisors.

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1 WHITEPAPER HLB Van Daal & Partners is a member of HLB International. A world-wide network of independant accounting firms and business advisors. #EXTRA: EXPATRIATE SERVICES July 2014 This white paper is enriched with Layar. 1. Download the free Layar app for Android or iphone. 2. Find the pages with the Layar logo. 3. Open Layar, hold the phone above the page and Tap to view to start the scan. 4. Hold the phone above the page, listen, view and see more! HLB international mobility experts can provide a range of services in determining the most appropriate remuneration packages for Expats. The specialists of HLB Van Daal & Partners N.V. can help to set up efficient procedures and assist in 30% ruling applications. The specialists have a broad expertise in the field of taxes, social security and immigration rules. In this edition Known for its high living standard, world class universities, excellent infrastructure and the reimbursement ruling, The Netherlands is a popular destination for Expatriates around the globe. If certain conditions are met by Expats working in the Netherlands, a tax free allowance amounting to 30% of the Expat s gross salary is granted. The Netherlands has a special tax regime for foreign employees. The 30% ruling is considered a compensation for the expenses incurred by a foreign employee leaving his home country and working abroad in The Netherlands. If conditions criteria are met, the effective income tax rate for qualified Expatriates is 36.4% instead of 52%. This whitepaper will describe the working and the conditions of the 30% ruling. in the Netherlands. The reimbursement, not including the untaxed 30% allowance, has to amount to at least ,- (which is including the tax free allowance). A reduced threshold of applies to immigrants up to the age of 30 with masters qualification; The employer and employee have to agree that the 30% ruling is applicable; The employer has to be liable to withhold Dutch payroll tax on the employee s salary; The Expat has to be recruited from abroad. Prior to the employment, the employer has to be residing 150 kilometers away from the Dutch border; This condition is under investigation of the European Court of Justice whether it is in conflict with the freedom of movement of persons within the European Union. 1. Expatriate Services 2. Application of the 30% Ruling 3. Calculation Benefit 30% ruling 4. Azure client case 5. Typical Dutch Survival tips in the Netherlands 6. Contact The Conditions To be eligible for the 30% ruling, the following conditions have to be met: The employee is required to have a specific expertise field which is scarcely available Disclaimer This publication contains general information only, and none of the firms of HLB Van Daal & Partners N.V. is by means of this document, rendering profession advice or services. No entity in the network of HLB Van Daal & Partners N.V. shall be responsible for any loss whatsoever sustained by any person who relies on this publication. 1 Enterprising, just as you

2 Based on the conditions above, the employee can be qualified to be appointed for the 30% ruling. The Expat must be recruited in another country before entering The Netherlands. In order to receive the tax free allowance from the beginning of the contract, the submission has to be filed within 4 months. If the application is granted the 30% ruling may be applicable to the Expat for a maximum of eight years. The ruling is applicable as long as the requirements are met. The 30% ruling ends when the conditions are not met. Special opportunities Deemed non residency Expats living in the Netherlands are liable on income tax on their worldwide income. At least in principle. Even though the Expat lives in The Netherlands, under the 30% ruling it is possible to be treated as a partial non-resident taxpayer. Due to this qualification the Expat will only be considered to be a resident taxpayer for income from employment and home (box 1). Capital gain income from substantial interests and income from savings and investments remains completely tax free in The Netherlands and quite often also in the country of departure. Applicable income The 30% ruling can be applied on all the taxable income from labor. Remuneration in kind such as the income from option schemes build up and paid out during the stay in the Netherlands while the 30% ruling is applicable as well as the use of a company car are mildly taxed this way. Change of employer The 30% ruling ends on the last day of the employment. If the Expat considers changing employer during the granted term, it is possible to reapply for the reimbursement. In order to obtain the 30% ruling the new employment has to start within three months time. The same application procedure has to take place within four months for the new employment. Starting a business with the 30% ruling The 30% ruling can also apply when an immigrant is employed by his own legal entity. This enables interesting planning opportunities. Setting up a business and getting employed by that entity makes it possible to receive the 30% tax free reimbursement in the Netherlands, provided that this is executed properly. For establishing a Dutch legal entity called the B.V., only 1 EUR is required as minimum share capital. The entrepreneur who works for his B.V. is considered to be an employee. The 30% ruling can be applicable on the employment income. The salary and allowance are fully deductible from the profit of the B.V. The remainder of the profit is taxed against a 20-25% corporate income tax rate. A limited liable company such as the B.V. makes it is also possible to continue with the 30% ruling for the maximum period if the Expat is currently working as an employee and proceeds his activities in The Netherlands as an entrepreneur. The Expat must have then an employment contract with his own company and reapply for the ruling within 3 months time. Application of the 30% Ruling The taxable income for private individuals in The Netherlands is based on the box system. There are three types of income which are defined as income from work and home (box 1), income including capital gains in case of a substantial shareholding (5% or more of the capital of a legal entity) (box 2) and deemed income of savings and investments (box 3). The 2014 tax rates are as follows. Box 1: taxable income from work and home; Social security charges in the Netherlands may not apply, when the employee remains social secured in the country from where he used to live. 2

3 Box 2: taxable income from a substantial interest; Box 3: taxable income from savings and investments;. Calculation Benefit 30% ruling If the conditions are met, the Expat is granted a tax free allowance amounting to 30% times 100 / 70 of the gross salary subject to Dutch payroll tax. The tax effect of the 30% ruling can be demonstrated as follows: Annually Monthly Without 30% ruling EUR EUR Dutch Salary Taxable wage Less: Wage Tax Net Wage With 30% Ruling Annually Monthly Dutch Salary Less: 30% ruling Taxable wage Less: Wage Tax Net wage Add: 30% ruling Net compensation Tax Benefit Annually Monthly With 30% ruling Less: without 30% ruling Benefit NB: No income tax deductions have been applied in the calculations The gross-to-net calculations show the increase in net income monthly and annually while the costs for the employer remain unaffected. Our specialists can provide proforma calculations to determine the most appropriate remuneration package for the Expat. 3

4 General deductions In general Dutch tax payers who meet the criteria are entitled to general deductions from income. The most significant deductions are the following: Mortgage interest expenses; Charitable contributions; Retirement premiums expenses; Alimony expenses; Education expenses; Medical and disability expenses; Resident and non-resident taxpayers are entitled to levy rebates. Azure client case Mr. Azure has been assigned by his employer to work in the Netherlands. His employer offers him a gross income of per annum and a company car with a catalogue price of In order to compensate extra-territorial costs the employer agrees to implement the 30% tax-allowance in the employment contract. Mr. Azure decides to salute France and move with his family to the Netherlands. Mrs. Azure, from Dutch origin, heard from her family that the financial crisis ended the rising of property prices in the Netherlands. The low mortgage rates, the absence of capital gain tax on dwellings and the ability to deduct mortgage interest for income tax made the Dutch housing market very attractive. As the Netherlands does not restrict purchase of property by foreigners family Mr. Azure decides to contact Dutch estate agents. On the online property portal, Funda, mrs. Azure fell in love with a house in Meerhoven located near Eindhoven. The house has a value of In order to buy a new primary residence the family needs an mortgage loan of Mr. Azure starts to wonder what his grossto-net calculation would be with the 30% ruling. Mortgages can be taken directly from a bank or through an intermediary. For the family Azure the HLB advisor used their network to prepare the mortgage applications for the banks. Offering the highest level of service family Azure was advised by our legal advisors on the consequences of buying a house in the Netherlands. The implementation of the 30% ruling leads family Azure to the following net income: EUR EUR Dutch Salary Less: 30% renumeration Wage for employees insurance Add: private use company car Wage for wage tax Add: deemed income home Less: mortgage interest Taxable income Less: National insurance tax Less: Income tax box Add: Levy rebate Net income Satisfied with gross-to-net calculation our specialists prepared the application of the 30% ruling. In order to receive the 30% ruling from the beginning of the employment the request was submitted within four months after the commencement of the employment contract. 4

5 Typical Dutch Orange fever During international soccer tournaments everything in the Netherlands turns orange, including the Dutch people. Cheese The Netherlands is also known as the country of the true cheese eaters. Bicycles Despite the weather, Dutch people can be found racing on their rusty two-wheeled friends. Stroopwafels A highly addictive combination of two cookies with caramel center. A traditional and popular treat which is originated in the city of Gouda. King s day Experience patriotism and the joy of cities flooded in Orange on the worlds greatest party. Long live the king!! Going Dutch Where everyone pays for their own meal. In other words, no treat. Tiny country Look beyond the wooden shoes and windmills, our tiny country has the tallest people in the world. Holland vs. Netherlands? Is it Holland or the Netherlands? To make matters even more confusing. The country is the Netherlands, brand name is Holland, the people are Dutch. Stamppot A typical Dutch dinner would include mashed potato mixed with mashed vegetables, smoked sausage and gravy. Not the most sophisticated dish ever. Dropjes A salty-sweet black candy loved by Dutchies. To give an average, Dutchies consume around two kilograms of drop per year. Survival tips in the Netherlands Finance All major credit cards are accepted in the Netherlands but it is not common in many shops. Having a Dutch bank ac count makes financial more easier as pinnen is the most common method of payment. A citizen number, BSN, and usual paper work is required in order to open a Dutch bank account. Language Even though Dutch people are linguists there are plenty of language classes for learning Dutch. Residence permit Dutch immigration law permits a residence on many grounds. Each purpose of stay has it own conditions. A residence permit is applied at the Dutch Immigration and Naturalization (IND) within 3 working days of arrival. The most applied residence purposes for Expats are: 1. Knowledge Migrant 2. Working as an employee 3. Scientific researcher 4. Admission Scheme for Highly Educated Persons 5. Student The costs of a residence price list is found on the IND website. Driving The Netherlands is a right-driving side country. This implies that driver sits on the left-hand side of the car. An Expat eligible for the 30% ruling can exchange its existing driving license for a Dutch one. Others must pass the regular Central Office for Motor Vehicle Driver Testing (CBR) theory and a driving test. Health The health care system is of a high standard in The Netherlands. It is a combination of a private health plan built on the principles of solidarity. The Expat needs to take out a Dutch healthcare insurance within four months of arrival. To have a gatekeeper for all the medical records the Expat needs to apply for a huisarts 5 (General practitioner). It is common to register with one close to home. Social network No Expat is completely immune for homesickness. The Netherlands has a large Expat community. Expat related clubs and associations can give a little taste of home.

6 International schools The schools in the Netherlands offer a high-quality education. There are many international schools that focus on internation ally recognized programmes: International Baccalaureate (IB). This makes it easier to transfer students to international schools around the world. The top 3 common Expatriate nationalities in the Netherlands: 1. Indian 2. American 3. Chinese The most common labor sector for Expats in the Netherlands: 1. Information and Technology Industry 2. Scientific Research and Development 3. Trade and Labor Market Contact: Breda: Wilhelminapark SL Breda T breda@hlb-van-daal.nl Heerlen: Nieuw Eyckholt DJ Heerlen T heerlen@hlb-van-daal.nl Schijndel: Nieuwe Eerdsebaan VS Schijndel T schijndel@hlb-van-daal.nl Waalwijk: Prof. Asserweg 8, 5144 NC Waalwijk T waalwijk@hlb-van-daal.nl Dongen: Lage Ham AC Dongen T dongen@hlb-van-daal.nl Geleen: Rijksweg Noord AB Geleen T geleen@hlb-van-daal.nl s-hertogenbosch: Pettelaarpark PR s-hertogenbosch T denbosch@hlb-van-daal.nl Maastricht: Raadhuisplein CW Cadier en Keer T maastricht@hlb-van-daal.nl Tilburg: Zuiderkruisweg TB Tilburg T tilburg@hlb-van-daal.nl Uden: Losplaats NJ Uden T uden@hlb-van-daal.nl Amsterdam WTC Amsterdam, H Tower Level 5 Zuidplein XV Amsterdam T amsterdam@hlb-van-daal.nl Gemert: Dommel VH Gemert T gemert@hlb-van-daal.nl Oss: Obrechtstraat 43f 5344 AT Oss T oss@hlb-van-daal.nl Veghel : Eisenhowerweg 14a 5466 AC Veghel T veghel@hlb-van-daal.nl V. (Vandana) Passy LLM Tax Advisor Given my goal-driven nature, it is my ambition to ensure that it is possible to be inventive, open-minded and provide the best possible tax advice for our clients. I am driven by the challenge of tax efficient solutions that work in everyday practice. My aim is to provide out-of-the-box solutions for international tax related issues. The accountants and tax consultancy firm HLB Van Daal & Partners has sites in Breda, Dongen, Geleen, Gemert, Heerlen, s-hertogenbosch, Maastricht, Oss, Schijndel, Tilburg, Uden, Veghel, Amsterdam and Waalwijk and employs around 300 people. The worldwide presence of HLB enables us to serve you beyond the borders too. Through our international HLB-network we can help you to do business in more than a hundred countries. There is effective cooperation with 500 offices throughout the world with short lines of communication. 6