Tax credits for foreign taxpayers

12 February 2020

As of 1 January 2019, the (full) tax portion of the tax credits may not be taken into account in the wage tax of foreign taxable employees. This will lead to a reduction in the net monthly salary of the foreign taxable employee.

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Written by:
Clea Cremers Senior tax advisor

Tax credits for foreign taxpayers 

At present, payroll tax does not take into account the country of residence of the employee. As a result, foreign taxpayers often receive more tax credit than they are actually entitled to in income tax. Only qualifying foreign taxpayers are entitled to the full tax part of the tax credits.

A qualifying foreign taxpayer is a person who:

  • is a resident of a member state of the European Union, Iceland, Liechtenstein, Norway, Switzerland or of Dutch overseas territories (Bonaire, Saba or St. Eustatius)
  • and of whose global income 90% or more is subject to Dutch income tax (for this, an income statement has to be submitted to the Tax and Customs Administration).

Since employers with the duty to withhold taxes do not know whether an employee qualifies as a foreign taxpayer, from 1 January 2019 the qualifying foreign taxpayer can apply the tax portion of the general tax credit, the young disabled discount, the elderly discount and the single elderly discount via the income tax. They will then receive the relevant tax credits at the end of the year in question.

Qualifying foreign taxpayers can also apply for a provisional income tax assessment and thus receive the tax part of these tax credits during the tax year. However, the provisional assessment can only be requested if it has become apparent during a particular year that a taxpayer is a qualifying foreign taxpayer.

More information?

Would you like more information? Please contact Clea Cremers, senior tax advisor, by phone +31 (0)77-3217715 or send Clea an email.

Are you an employer and would you like more information? Our specialist will gladly assist you!

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