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Audit 30% ruling 2003

Tax office: extra attention for 30% ruling in 2003


Recently, the Dutch tax authorities announced that they will pay special attention to expatriate-employees, benefiting from the 30% ruling, during their forthcoming wage and income tax audits. Particularly, the tax authorities will focus on the calculations of the taxable income of US nationals within the expatriate group. As a result of the aforementioned we would like to advise you that a review of your payroll administration should take place with respect to the expatriates salaries before the end of this tax year. Below we have briefly outlined the two areas that will receive the special attention of the tax authorities during tax audits.

 

1. Expatriates in general: expatriate expenses


Expatriates working in the Netherlands and benefiting from the 30% ruling should, in most cases, effectively, pay Dutch wage and income tax on reimbursements of costs that qualify as so-called expatriate expenses. Therefore these expenses must be taken into account in the payroll administration and cannot be reimbursed tax free in addition to the 30% tax free allowance.


2. US nationals


With respect to US national expatriates, who work in the Netherlands, the issue is two fold:


  1. The tax authorities have indicated that they will carefully review and ask proof of the number of foreign days, on which US national expatriates, working in the Netherlands and benefiting from the 30% ruling, usually do not pay tax in the Netherlands (different for statutory directors);
  2. When a US national is assigned to the Netherlands on a net contract basis and remains to be paid from the US payroll, during his stay in the Netherlands, a gross up needs to take place in a Dutch shadow payroll. In this respect, the Dutch tax authorities have indicated that they will request a precise and clear reconciliation of the Dutch shadow payroll with the US W-2 statement of the individual.

 

3. Recommendations


Based on the above, we strongly recommend that the 2003 Dutch payroll administration is administered in such a way that:

 

For all expatriates:


  • The 30% ruling is applied and so-called extraterritorial expenses are not reimbursed tax free in addition to the 30% allowance;

 

For US nationals:


  • The exclusion of the remuneration relating to foreign working and travel days is preferably taken into account in the payroll and accurate proof of the foreign days is available;

 

When paid from the US payroll:


  • A precise and clear reconciliation of the Dutch shadow payroll with the US W-2 statement is made;
  • All remuneration (W2-income and local payments) is properly reported.

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