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Deadline personal income tax return 2018 & be aware of interest

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Now that the year 2018 has ended, it’s time to prepare for the Dutch personal income tax return (“aangifte inkomstenbelasting”) 2018! The Dutch tax year is similar to the calender year.

The Dutch tax office (“Belastingdienst”) has set the filing deadline of the personal income tax return 2018 on May 1st 2019. To this purpose you may receive a so called aangiftebrief 2018 from the Dutch tax office. Our tax advisors can assist with the full process to file your personal income tax return 2018.

In case you have to pay additional personal income tax on your personal income tax return 2018 be aware of the accruing interest (“belastingrente”) on the amount on tax due following the 2018 personal income tax return. In case you file your personal income tax return 2018 after May 1st 2019, the tax office will start calculating interest.

The tax authorities have three months to impose a personal income tax assessment 2018 after having taken receipt of a personal income tax return 2018. During this 3 months period they retain the right, if filed after May 1st 2019, to charge interest on the tax amount due following the 2018 personal income tax return.

Since the interest rate is fixed at 4% on annual basis, this interest rate is well above any interest percentage you may expect to receive on a Dutch bank current account / savings account.

Personal income tax may be due e.g. in case of savings held above the applicable thresholds or other taxable income which was not yet taxed, e.g. by means of wage tax and/or a preliminary tax assessment.

Filing your personal income tax return 2018 can be especially interesting in case of an expected tax refund, e.g. in the year of migration (immigration or emigration).

The Dutch personal income tax rates for tax year 2018 (in Dutch) can be found here. The Dutch personal income tax rates for tax year 2019 (in English) can be found here

We can assist with the full process to file your personal income tax return. If needed we can arrange for a lengthy filing extension of your personal income tax return 2018, however be aware that the possible interest calculation will not be extended by the tax authorities.


Application term 30%-ruling reduced to five years as of 2019

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Both the Dutch House of Representatives and Senate have now approved the Tax Plan 2019 which includes the transitional rules for expats with a 30% ruling issued in 2018 or earlier. Therefore this new legislation will become effective as of January 1st 2019.

In short: As of the year 2019 the maximum application period for the 30% ruling will become five years. The application period of the existing rulings under the new legislation will depend on their current end date.

If the end date of an existing ruling is in 2019 or 2020, this end date will remain unchanged, if it falls in 2021, 2022 or 2023, then the new end date will be 31 December 2020. All later end dates will be shortened by three years. For a full up to date explanation of the 30% ruling, an overview of the current conditions and our related services, please click here!

For more background on the changes per January 1st 2019, please scroll down:

On September 18th (2018) the official tax plans for 2019 have been offered to Dutch Parliament (“Tweede Kamer”). Cabinet has now filed their official legislation proposal to change the application term of the 30% ruling to a five year application period also for existing pre-2019 rulings. This despite the advisory board of State advising against the reduction of the application term for existing cases.

As expected further discussion was caused by the final proposal. With the Cabinet currently re-evaluating the announced abolishment of Dutch Dividend Withholding Tax (DDWT), already plans evolve as to where the budget on not abolishing the DDWT can be spend on.

Since the abolishment of the DDWT was originally aimed at keeping the business climate of the Netherlands interesting for foreign companies, it seems only logical that in case the DDWT is not abolished, to keep the funds available for the original goal: Investing in the Dutch business climate. Cabinet is currently discussing these subjects, possibly the reduction of the application term of the 30% ruling will be less strict. We expect to have more clarity soon.

Till the year 2012 the maximum application term was still 10 years, as of 2012 this was reduced till 8 years and as of 2019 the application term is shortened till 5 years. Scroll down for a link to the official document.

The filed legislation proposal does contain a transitional arrangement for international schooling fees, which can remain to be reimbursed for the full eight year period for existing rulings.

However still Dutch Parliament (as well as Dutch Senate) has to decide on the proposed legislation changes. Based upon the changes of the year 2012, in which prior application terms were retained, the applicable terms valid before the year 2019 will hopefully still be respected. However this would have to follow from a Political amendment, so let yourself be heard in The Hague!

Because of this proposed reduction of the 30% ruling term, you may wish to consider to try and receive your possible bonus and/or exercise stock options rights before the new proposed end date of your 30% ruling so the ruling may still be applied.

Please contact us for further information on the 30%-ruling. We advise and prepare requests for application of the 30% ruling and we are also specialised in complex cases which HR departments or even big four firms are not equipped to handle.

Please be sure to also read the following related articles which may well lead to a tax benefit:

In addition we prepare income tax returns and can serve as a one-stop-shop for all your company’s tax / accountancy / legal requirements.

The new 30%-ruling plans, the above mentioned comments & full evaluation document (in Dutch): inetsreactie_op_de_evaluatie_van_de_30%-regeling_voor_ingekomen_werknemers_(Kamerstuk_34785-83)  kabinetsreactie-evaluatie-30-regeling

Qualification individual objections to income equity tax 2017

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Individual objections to income equity tax assessments 2017 will be treated as one ‘mass’ objection. As of the tax year 2017 the calculation method of the deemed interest has changed. This new method has lead to criticism.

This new deemed interest method is a fiction based upon a fiction. Deemed are both the sort of investments made as well as the interest made on these investments.

If you have objected, or if you are planning to object to the personal income tax assessment 2017,  the following will be of importance. The State Secretary of Finance has decided that all individual objections to income equity tax assessments 2017 will be treated as one ‘mass’ objection. This will save individual tax payers from a lot of work and court / advisory fees.

Already objections against the 2017 equity tax deemed interest method have been processed by the tax office and will come before tax court. the final outcome of these procedures will be leading for the outcome of all individual objections against the 2017 income tax assessments.

However there are some conditions for your objection to fall under this ‘mass’ objection procedure. Your objection should contain the following legal question:
In the fiscal year 2017, are the flat-rate elements of the system, in conjunction with the tax exempted threshold and the tax rate of 30%, in violation of:
1. Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter: ECHR), without assessing the violation of the “fair balance” at the level of the individual taxpayer; or
2. the prohibition of discrimination under Article 14 ECHR?

The Dutch legal language version you can find in the link below to the actual Decision of the State Secretary of Finance.

If in the end of the test procedures, the deemed interest system is indeed in breach with EU law, it is expected that counterproof is most likely allowed on individual basis.

If following this counterproof that deemed interest is e.g. at least 10% higher than the actual realised result in 2017, this lower actual interest will be the taxable value. Tax court will develop such a method in case there is a breach with EU law.

Please be aware that despite this ‘mass’ objection procedure, individual tax payers are still held to object on time (within six weeks after the date of the final personal income tax assessment 2017).

Till date, although many procedures have been before tax court, still the deemed interest method (applicable till 2017) active since the year 2001 is not in breach with the legal freedom the Dutch legislator has to impose tax law.

It is difficult to predict the outcome of these test procedures although regarding another valuation method (value of rented out real estate) containing fiction upon fiction, counterproof was allowed by tax court.

In case the test case leads to the conclusion that there is no breach with EU law, you could still consider the following solution: Hold your equity through your own personal limited liability company!

Decision State Secretary of Finance: Mass objection equity tax 2017

Tax refund if your tax burden fluctuated over a period of three years

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You could be eligible for a tax refund if your tax burden fluctuated strongly over a consecutive period of three years.

Did you have a highly variable income spread over three consecutive years? Then you probably pay more tax than if you receive that income evenly over a year. You can then qualify for the so called averaging scheme (“middeling”).

With averaging you calculate your average income over 3 consecutive calendar years. This is the averaging period. You then calculate how much tax you have to pay per year. Are the new tax amounts lower than those of the previous attacks? Then you may be entitled to a refund.

For whom is averaging meant? Here are a number of example situations:

You got a permanent job after your graduation and you had a part-time job besides your studies.
You received a severance payment (‘golden handshake’) and then a WW benefit.
You have started or stopped working in recent years.
You work as a freelancer or as an entrepreneur.
You have taken unpaid leave (for example for a sabbatical).
You started working part-time.

Are you a foreign taxpayer in one or more of the relevant three years. Then the following applies to the averaging arrangement.

From tax year 2015
You may use the averaging arrangement if you are a qualifying non-resident taxpayer (no longer a choice).

Tax years 2014 and earlier
You may use the averaging arrangement if you have opted for the resident taxpayer as a foreign taxpayer. Or if you earn 90% or more of your total income (worldwide income) in the Netherlands.

We can take care of the entire procedure for averaging. In addition, we can assist you in drawing up your income tax returns.

Tax qualification Interest Rate Swap (IRS) mortgage loan and box 3

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Dutch High Counsil has now decided that an Interest Rate Swap (IRS) with a negative value is to be part of the debt in box 3.

An IRS is a complex financial product used in many loan varieties. In short a IRS  is an agreement between an individual/company and the bank on the basis of which this individual/company has an obligation towards the bank on the one hand and a right against the bank on the other. The IRS is generally used to manage or hedge interest rate risks, or to speculate on developments in interest rates.

The value development of an IRS is largely dependent on the development of the fixed market interest rate. If the fixed market interest rate falls in relation to the agreed fixed interest rate, the swap will have a negative value for the individual/company and vice versa.

Last year the Dutch High Court had already decided that reimbursements paid on an IRS related to financing of own home properties were non tax deductible. The reason being that the link between the IRS and the finance loan for own home propierty was to limited to allow a deduction of costs related to this IRS.

The most recent decision to qualify such negative value of an IRS as a debt in box 3 is therefore in line with last years’ decision to view the IRS as a separate asset and liability towards the bank.

More in general, if you own a financial product abroad than for tax purposes the qualification of such product (e.g. annuities, pensions, deposits, loans and other financial plans) is to be done according to Dutch tax standards.

It is recommended that you perform such qualification as otherwise the Dutch tax office may – in case they successfully claim such product to be taxable in the Netherlands – impose additional tax assessments plus fines and interest for the prior twelve tax years.

We can assist to prepare such a qualification of your foreign financial products according to Dutch tax standards.

Furthermore we can take up the correct qualification of your income, assets and debts in your personal income tax returns.

 

Deadline personal income tax return 2017 & be aware of interest

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Now that the year 2017 has ended, it’s time to prepare for the Dutch personal income tax return 2017! Although the Dutch tax office has recently stretched the filing deadline in the Netherlands from April 1st 2018 till May 1st 2018 in the so called aangiftebrief 2017, it could be interesting to file your 2017 personal income tax return before April 1st 2018.

In case you have to pay additional personal income tax on your personal income tax return 2017 be aware of the accruing interest (‘belastingrente’) on the amount on tax due following the 2017 personal income tax return. The tax office may start calculating interest as of July 1st 2018 in case no personal income tax assessment over tax year 2017 has been imposed yet.

The tax authorities have three months to impose a personal income tax assessment 2017 after having taken receipt of a personal income tax return 2017. During this 3 months period they retain the right to charge interest on the tax amount due following the 2017 personal income tax return.

Since the interest rate is fixed at 4% on annual basis, this interest rate is well above any interest percentage you may expect to receive on a Dutch bank current account / savings account.

Additional personal income tax may be due e.g. in case of savings held above the applicable thresholds or other taxable income which was not yet taxed, e.g. by means of wage tax and/or a preliminary tax assessment.

Another possible reason to file your personal income tax return 2017 before April 1st 2018 is that the tax authorities ‘guarantee’ a reply (mostly by way of a personal income tax assessment 2017) before July 1st, 2018. This could be especially interesting in case of an expected tax refund, e.g. in the year of migration (immigration or emigration).

We can assist with the full process to file your personal income tax return. If needed we can arrange for a lengthy filing extension of your personal income tax return 2017, however be aware that the possible interest calculation will not be extended by the tax authorities.

Some brief additional information on the Netherlands Dutch personal income tax system can be found here.