Year-End Tips 2021: 4 Tips for Cross-Border Employment
During the dark days of December it is worthwhile to check what tax-related steps you need to take before the end of the year or what would be better to postpone until the new year. We have listed the up-to-date tips for cross-border employment for you.
1. 30% facility and payroll accounting
Are you an employer and do you have foreign staff working in your organisation who make use of the 30% facility? Then we advise you to check before the end of the year how the 30% facility has been processed in the payroll accounting. For example, the annual salary of employees who have the 30% facility must meet the minimum salary standard to be eligible for the 30% facility. If the annual salary does not meet the salary standard, then the employee no longer meets the conditions to be eligible for the 30% facility. In the worst case this can lead to the tax authorities withdrawing the 30% facility with retroactive effect.
To avoid having to make corrections in the closed payroll accounting or the decision being revoked we advise our clients to check the salaries of employees for whom a 30% facility has been issued, before the end of the year.
It has also been confirmed in case law that your employee may not apply the 30% facility in his or her personal income tax return if you do not designate 30% of their salary as final levy salary.
2. Tax optimisation for high net worth expatriates
Further to the reduction in the duration of the 30% facility from eight to five years, many expats ‘lost’ the 30% facility from 1 January 2021. Apart from how this affects the amount of the net salary, from 2021 these expats will no longer be able to opt for a partial foreign tax liability. This means that from 2021 these expats will become tax liable for their worldwide income from savings and investment (box 3). For expats with a high net worth, in particular, this can lead to an unwelcome high tax burden which only becomes apparent to many of them when their income tax returns for 2021 are prepared.
Do you have assets in excess of €500,000? Then let us inform you about the avenues available that will enable you to optimise your savings and investments for tax purposes. We can advise you on such matters.
3. Homeworking across the border during the pandemic
As a result of the pandemic measures employees are still being encouraged (and sometimes even required) to work from home. In cross-border situations this can have unexpected consequences for employers and employees alike in terms of tax, social security and even employment law!
The Netherlands has bilateral agreements with its neighbouring countries, Belgium and Germany, which lay down that days worked from home may be taxed in the country where the employee would normally have worked. Although the employee still has the right to invoke the provisions of the tax treaty. In September 2021 these agreements with Belgium and Germany were extended until 1 January 2022, however it is still unclear what will happen thereafter.
Such agreements have not (yet) been made with other countries and the provisions of the relevant tax treaty must be invoked to find out which country has the right to levy income tax in relation to the cross-border activities.
The Social Insurance Bank (SVB) published a policy at the start of 2020 in which it indicated that it does not attach any consequences to the social security position of employees who, as a result of working from home in a cross-border situation, under EU law would have social security cover in the country of residence. These policy rules can still be viewed on the website of the Social Insurance Bank (SVB). It is unclear how long these policy rules will continue to apply.
Under international labour law, an employee is governed by the employment law legislation of the country where he or she normally works. However, in a situation where an employee works from home for a longer period but across the border, it may be such that the employment law of the country of residence becomes applicable.
We advise both employers and employees to make sure that they are properly informed about the potential consequences of working from home in cross-border situations.
4. Update on announcement of withdrawal of the approval given for the tax treatment of fees paid to foreign directors and supervisory directors
In last year’s newsletter with year-end tips, we informed you that the government had announced that the approval given to apply the exemption method for fees paid to directors and supervisory directors of foreign companies would be scrapped. Instead of exempting the foreign income, the tax paid abroad will be deducted from the Dutch income tax to the extent set out in the relevant tax treaty. Insofar as a tax treaty prescribes the exemption method, this can, of course, be applied. The settlement method generally results in a higher tax burden than the exemption method.
It had been expected that this approval would be withdrawn in 2021. In the end, however, that has not happened, although we have heard that it is still in the pipeline. We advise you not to wait but to make sure that you are informed in good time about the tax consequences and the options available in this area!