The recent review of the 30% rule in the Netherlands has been contested in the European court of justice during August 2013. The 30% rule stipulates that any incoming employees to the Netherlands must have been living at a distance of no less than 150 km from the Dutch border prior to the commencement of their new contract. Changes brought in by the tax authorities in January 2013 include the requirement of proof that you have lived in a place beyond this distance for a minimum period of 2 years before granting any tax free allowance.
In a recent appeal, the high court heard that the 150 kilometer limit appeared to be arbitrary in its interpretation, and that it had led to divided opinion in the lower Dutch courts. The ruling, which offers expat workers a tax cut to compensate for the higher cost of working in Holland on a temporary basis, was tightened up In January 2013 with the introduction of the 150 kilometer caveat. The Ministry of Finance had been concerned that the rule was being flaunted by workers along the Dutch borders.
The point of contention with the European court was that the newly introduced 150 kilometer limit could lend itself to workers being treated differently, depending on where they came from. Such a scenario would therein be in conflict with European rules governing the free movement of people across borders.
A case was brought to the attention of the court by the tax consultancy firm Deloitte on behalf of a client who lived and worked in the Netherlands during week days, but actually resided in Germany. Under European law, the client is obliged to pay tax in the country where they work. In this instance however, because the client lived less than 150 kilometers from the border, they were deemed as not being eligible for the 30% ruling. This situation could now result in a series of challenges from residents of Germany and Belgium who work temporarily in the Netherlands.
The case continues….!
If you have any further questions on the 30% ruling or seek a more detailed explanation on how it effects your tax position in the Netherlands, please contact us at: [email protected]