The 30% ruling is the best tax benefit we have in the Netherlands. If you are a US national the ruling has even more advantages, but mind the 30% ruling and the days worked abroad.
30% ruling – deemed non resident
The 30% ruling we have explained in many articles before, you can find here the link to those articles. Now we would like to focus on the days worked abroad.
If you are a tax resident in the Netherlands and a US national or a US green card holder, then you are a tax resident in the Netherlands for your worldwide income and you need to file a US tax return based on your nationality.
The moment the 30% ruling is granted to you, you can choose to be regarded to become a deemed nonresident tax payer. This is a choice you can make every year, but basically all 30% ruling holders make this choice as then none of the world wide assets need to be reported.
Not all 30% ruling holders make this choice. The ones who think they can use the tax return the tax office (Belastingdienst) has set ready for them explicitly made the choice not to be a deemed nonresident tax payer, so they have to report their worldwide assets. Which of course they have not done as they are not aware. So they are not compliant.
The moment the choice is made, then the regular tax payer has become a deemed nonresident tax payer, but the US national or US greencard holder has become a true nonresident living in the Netherlands! Why a true nonresident? The US tax office simply assumes that if you are a deemed nonresident in the Netherlands, you are a resident tax payer in the USA.
The nationality in combination with the US tax rules, the Dutch American tax treaty and the possibilities in the 30% ruling make that US national in the Netherlands under the 30% ruling can become a deemed nonresident.
30% ruling and the days worked abroad – tax reduction
The consequence of the above is that a nonresident cannot be taxed in the Netherlands for the days the tax payer was physically not in the Netherlands.
The calculation is for the Monday to Fridays you work abroad, the calculation base is maxed by the Dutch court. Important is that you are physically outside the Netherlands. If you work one day in London, you go in the morning and return in the evening, then you were physically that day in the Netherlands and that day does not count.
If you leave Sunday and return Saturday for work abroad, you have 5 days discount.
Abroad is any other country, not necessarily the USA. Abroad for work we need to stress, not pleasure.
Even if you did work on a Saturday or Sunday, these days are not part of the calculation.
30% ruling and the days worked abroad – proof
The proof is the actual reason for this article. The obvious proof is a copy of the US passport and a copy of the 30% ruling. The most important proof is a signed list of days you worked abroad. This list needs to have been signed by your superior.
We often receive excel overviews with where a person was working and when holidays were taken up. We use that overview, but we stress to get it signed. The reply is often “yeh yeh we will”. But is that the case. From experience we know that the tax office makes inquiries two years after the return was filed. The refund due to the days worked abroad discount can be huge. But if you need to repay the already spend refund because the administration is not up to date, you have issues.
30% ruling and days worked abroad case
A client of our office had many years ago the 30% ruling and the US nationality. This client worked many days abroad as he travelled the world for the company. So a EUR 25.000 refund was created by the calendar days worked abroad.
Tax return filed, refund received, money spend. Then two years later the tax office asked for the proof that this deduction could be applied. Proof such as 30% ruling, nationality and the signed list of days worked abroad.
Although we stressed to have the list signed, the client actually had not done that or forgotten about it. However, in the meanwhile he started to work for the competition. And the former employer was not happy about that. So when our client asked the former employer to provide a signed list, the request was denied. The client had to pay back the tax benefit.
This is how important a silly signature can become.
30% ruling days worked abroad – outcome
The outcome of the calculation can surprise you, depending on the size of your annual salary. The higher the salary, the higher the refund. However, the refund you receive is part of the US tax return. The US tax rate over this refund is significant lower, hence you still benefit from applying this calculation.
Orange Tax Services
We provide tax services and we are specialized in expats. That implies you are from abroad and work and live in the Netherlands, or you are still abroad and you purchased property in the Netherlands.
US nationals require always to file a Dutch tax return, as the Dutch tax return is the bases of the US tax return. The 30% ruling makes the Dutch tax return more simple, but does have implication that we never recommend to use the tax return set ready by the Dutch tax office. Yes we charge you for our services, but the tax office tax return contain incorrect details for the 30% ruling holder.
The US national can benefit from the day deduction and we are happy to included that in the tax return. All at the fixed fee of EUR 390 incl VAT including the tax partner.