No more tax credit for non-resident taxpayers

If you work in the Netherlands but live outside the Netherlands, you qualify as a non-resident taxpayer. With effect from 1 January 2019, some non-resident taxpayers will no longer be granted a personal income tax credit for payroll tax purposes.

How will this affect you?

The payroll tax liability will become higher than in the years before 2019 as a result. In short, this measure will cause the net monthly salary of a large proportion of non-resident taxpayers to drop.

The liquidity loss will vary from € 51 for non-resident taxpayers who have not yet reached their state retirement age to € 132 for non-resident taxpayers who have reached their state retirement age.

The Dutch Tax & Customs Administration distinguishes between two groups of non-resident taxpayers:

1. Qualifying non-resident taxpayers (90% of world-wide income subject to Dutch personal income tax); and
2. Non-qualifying non-resident taxpayers (less than 90% of world-wide income subject to Dutch personal income tax).

Non-qualifying non-resident taxpayers

Non-qualifying non-resident taxpayers are not eligible for tax credits in principle. That said, to date, non-qualifying non-resident taxpayers have effectively been granted the tax credit for payroll tax purposes. As a result, they have had to repay the unjustly awarded tax credit when filing their personal income tax return. In brief, the measure is a good thing for this group of taxpayers as it will reduce their administrative burden.

Qualifying non-resident taxpayers

The new measure will be extremely cumbersome for qualifying non-resident taxpayers who live in Belgium and work in the Netherlands, and are in fact eligible for the tax credit. After all, the right to the tax credit will continue to apply ‘as usual’ for personal income tax purposes. There are two ways for this group of taxpayers to still invoke the tax credit:

1. When filing their personal income tax return (monthly liquidity loss continues); or
2. By applying for a monthly provisional tax refund (liquidity loss is offset).

Conclusion

From next year onwards, no more allowance will be made for the tax credit in withholding payroll tax from non-resident taxpayers. Taxpayers who do claim this tax credit can still invoke it when filing their personal income tax return or by applying for a provisional personal income tax refund.

To find out whether this measure will affect you or one of your employees, please contact one of the international advisers at accon■avm via international@acconavm.nl or use the contact form below.