Under the 30% ruling, a Dutch employer can assign a fixed tax-free allowance to an employee who is recruited from abroad of up to 30% of the salary. To reduce unwanted use the ruling is tightened since 1 January 2012. From that date the requirement is introduced that an employee only qualifies for the 30% ruling if he was more than two thirds of the 24-month period prior to the commencement of the employment in the Netherlands residing at a distance of more than 150 kilometers from the border of the Netherlands.
The present case involves Mr. C. G. Sopora who in 2012 worked in the Netherlands for a Dutch employer. The last two years before he started working in the Netherlands, he lived in Germany, albeit less than 150 kilometers from the Dutch border. The tax authorities refused to grant the 30% ruling to him. Mr. Sopora appealed against this decision with the proposition that the refusal to grant the ruling to him violates EU law .
Since the Dutch Supreme Court was not certain whether the 150 km requirement violates EU law preliminary questions were sent to the European Court of Justice in 2013. Advocate General Kokott issued an opinion in this case on 13 November 2014. In short:
The national legislation which entitles an incoming employee who resides more than 150 km from the Dutch border to a tax-free allowance of extraterritorial costs which may be higher than the actual extraterritorial costs, while the height of the reimbursement for an incoming employee who lives less than 150 km from the border is limited to the demonstrable actual amount of the extraterritorial costs, provides no conflict with EU law. However, that is only the case if the latter workers (living less than 150 km from the Dutch border) in the vast majority of cases commute to work in the Netherlands each day and in fact are not faced with extraterritorial costs. The referring court has to examine that.
So if the referring court finds out that most employees who live within 150 kilometers of Dutch border do not stay in the Netherlands but go back home each day the Advocate General has the opinion that there are no extra territorial costs and as such there is no violation of EU law. The employees within this group who will stay in the Netherlands will then form a minority and will just have bad luck. They can get their real expenses reimbursed tax free, but won’t get the 30% ruling. Let’s wait and see what the European Court of Justice decides and how the referring court will investigate whether employees who live close to the border don’t stay in the Netherlands.
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