The 30% facility and the 2023 tax return

As a foreign worker who has come to the Netherlands, you incur additional costs, such as additional living expenses, travel expenses to your home country, or additional expenses for advisers. These additional costs are referred to as ‘extraterritorial costs’. Given that you meet the conditions, you and your Dutch employer have opted not to seek tax-free reimbursement of costs that you actually incur, but to get 30% of your wage paid tax-free instead. To get this tax break, you and your employer submitted a request to the Dutch Tax and Customs Administration.

The Dutch Tax and Customs Administration approved your request because you have specific expertise that is not available, or not readily available in the Dutch labour market or because you have been seconded to the Netherlands as part of a job rotation scheme at your multinational company. Given that this must be a temporary situation, the Dutch Tax and Customs Administration has, in principle, granted you the tax break for a period of 5 years.

The 30% of your salary that you are paid tax-free is formally considered to be ‘tax-exempt pay.’ This means that it is, technically speaking, not part of your salary. Your employer does not have to withhold any payroll tax from this pay and you do not have to declare it on your income tax return.

You may like to opt for ‘partial foreign tax liability’. This option for employees who are using the 30% tax facility is laid down in the Dutch Income Tax Act. It means that you choose partial application of the rules for persons who are liable for tax in another country. You will then not have to declare your capital, apart from any real estate you own in the Netherlands, in Box 3 (for taxable income from savings and investment) of the Dutch tax return.

For all other purposes, such as for taxable income from work and home ownership (Box 1), the partner scheme, and allocation of income components, you will be taxed as a Dutch taxpayer.

Partial foreign tax liability is an option you choose on your income tax return by answering the questions about Box 2 and Box 3 as if you were tax liable in another country. You can choose this option every year as long as you qualify for the 30% tax facility.

We have outlined above what the 30% tax facility is. This is, however, a simplified description of a complex scheme. Perhaps you also receive income from and/or have assets in multiple countries. If so, you need to find out in which country you must file your tax return and pay tax. While not relevant to 2023, please be aware that the 30% tax facility is set to be scaled back. We recommend that you, as an expat, always get solid advice from a tax adviser, including on filing your income tax return for 2023.