ECJ-Recent Developments in Direct Taxation 2013

S. 132I. Introduction

For many years, the Netherlands has provided for the so-called 30% wage tax facility. This optional facility is open to foreign, high-skilled expatriates that take up employment in the Netherlands and effectively provides for a fixed exemption of 30% of the income received from this employment, as defined. Originally, the exemption sought to compensate expatriates for additional expenses related to their temporal stay in the Netherlands (extra-territorial expenses), but in the course of time, the facility has evolved into a labour cost subsidy for Dutch enterprises wishing to attract high-skilled employees from abroad. The facility is open to non-residents only and therefore typically discriminates against the Netherlands’ “own” nationals, notably where the extra-territorial expenses suffered by an expatriate are in reality lower than the amount that is exempt from tax.

As from 2012, the Dutch legislator has tightened up the scope of the 30% facility in order to reduce the distortive effects of this reverse discrimination. From 2012, foreign employees that were, prior to their employment in the Netherlands, residing within a radius of no more than 150 kilometres from ...