Preliminary tax assessment 2025 for expats

Should you advise your expats to apply for a provisional assessment in 2025?

Perhaps a strange question towards the end of the year, but unlike in previous years, it is fast becoming a very important question.

 Part of the Dutch 2025 tax plan which is currently being discussed in the Senate, is the regulation regarding the reduction of the standard tax credit. While this reduction was and is to date only related to the taxable income in Box 1, the intention is now that this reduction will also need to be based on the taxable income of the individual taxpayer in Box 1, 2 and 3 together as per 1 January 2025,meaning that from start of 2025 and onwards, substantial interest income and income from assets will also count towards the calculation of this reduction.

In conjunction with the abolition of the right to choose for the so-called partial foreign tax liability as of 1-1-2025, it is precisely this link to Box 2 and 3 that has consequences for employees residing in the Netherlands who benefit from a 30% ruling that is was granted as of 1-1-2024 or thereafter. Unlike the group for which the 30% ruling was already applicable in the last pay period of 2023, the first-mentioned group cannot claim the applicable transitional law on which to continue the right to choose for the so-called partial foreign tax liability that is to be abolished as of 1-1-2025. Unlike in 2024, these employees in question will be fully seen as a ‘normal’ taxpayer resident in the Netherlands for 2025 and subsequent years to follow. This effectively means that this group will become liable for tax on their entire worldwide income in Box 1, 2 and 3 as of 2025. Of course, the allocation rules based on applicable tax treaties will of course, here applicable, still apply but this measure will increase the taxable income for this group of employees. In addition to a possible increase in the effective tax burden, this measure will thus also results in a possible accelerated reduction of the aforementioned general tax credit.

In order to avoid a surprise when preparing the Dutch income tax return for 2025, it is therefore useful to point this out to the above-mentioned group of employees and, if there is a net salary or “tax equalisation” agreement, to determine the effect for you as an employer in more detail. This so that it is clear in advance what this upcoming confluence of legislative changes means for you as an employer.

If this analysis would show that there is an increase in the tax due in the Netherlands (naturally depending on the exact financial position of your incoming employee and agreements made), a provisional income tax assessment can be requested at the beginning of 2025, which can save tax interest.

If you would like further information based on the above, please do not hesitate to contact Bart, Aniek or Maud from our Taxperience HC team. They will be happy to assist you further.