It is almost time to file your 2020 tax return - a tax return that may have extra challenges. Did you know that the coronavirus and its measures may also have consequences for your 2020 tax return? J.C. Suurmond & zn Tax consultants explains.
Your physical work location is very important tax-wise and determines where you have to pay income tax. What if you suddenly ended up working more than expected in the Netherlands in 2020? Or the other way around; you ended up working longer than expected in another country working remotely for your Dutch employer? Be aware that this too may have tax consequences.
Take Thomas who owns an apartment in Amstelveen near Amsterdam, but has been working for a company in the UK. Before the coronavirus crisis started, he was working in the UK from a rented place most of the time. But since April 2020, his UK employer has agreed that he could work from his home in the Netherlands. He was paying taxes in the UK, but now the situation has changed. In 2020, he is taxable for his worldwide income and wealth in the Netherlands. Any tax paid in the UK will need reclaiming. He will also need to pay social security in the Netherlands. There are ways to make his tax situation easier; a qualified tax advisor could assist him with that. For example: his employer could set up a Dutch pay roll, keeping his UK health insurance via an A1 procedure.
Another example is Marcia who has been living and working in the Netherlands since 2016. Last year, she travelled back to her home country for half a year, to improve her situation and be closer to relatives during COVID-19 restrictions. During this time, she continued working (from home) for her current employer. She did stay registered in the Netherlands, continued with her insurance and everything else as if she lived in the Netherlands. It is important that she has not exceeded the 183 days in her home country – or otherwise she should bear in mind that her home country might send her a tax bill. If the 183 days are exceeded, then the Netherlands should grant double taxation deduction in proportion to the days worked abroad.
183-day rule
This so-called 183-day rule prevents you from paying tax on your salary in two countries and determines in which country your salary should be taxed. Have you been working in another country for more than 183 days in 2020? In that case, based on the 183-day ruling, your salary is taxable in the other country. If it is less than 183 days, your salary remains taxable in the Netherlands. This may sound simple, but in reality, in such cases, it is complicated to determine in which country taxes are due. For example, it is necessary to count your working days in each country correctly; including vacation days.
Esther is a Dutch citizen but moved to Canada for work in 2018. In May 2020, she got stuck in the Netherlands due to COVID-19 while visiting family during holiday and has also been working here remotely. She realises that while she was taxable in Canada before, this may have changed for 2020 because she was in the Netherlands for over 183 days. She is wondering if there has been any relaxation on the 183-day rule due to COVID-19.
Let’s hope the Dutch tax office is indeed more flexible as this is a new situation, however, this is not yet clear.
If you were in the above situation or similar during 2020, make sure your 2020 tax return is filed properly. A qualified tax expert can support you and make sure you are not being double-taxed - or taxed too little, for that matter! Nobody likes an unexpected tax assessment years later with fines and interest.
How to be prepared for next year’s tax return?
Unfortunately, we are still in the middle of the coronavirus pandemic and consequent measures. This means that in 2021, your international situation may be different than expected as well. But in that case, you may still be able to structure the situation in such a way that tax consequences are minimal, or rather the most favourable. Presenting your international work situation to a tax advisor can help you make the best decisions possible.
M-form 2020
The coronavirus crisis may also have forced you to leave the Netherlands sooner than expected. If you have already emigrated, you will have to file an M-form for 2020. Make sure this is done correctly and in a tax-efficient way since a costly mistake is easily made. Especially if you have sold your house in 2020 or are not sure whether to sell or rent out your house, seeking tax advice saves you time, stress and money. If you are still in the process of leaving, you have time to structure things as tax-efficient as possible. A tax advisor can support you in this process.
30% ruling end
Another factor to consider for next year’s tax return is the end of the 30% ruling. Did your 30% ruling come to an end in 2020? In that case, it is important to be prepared for the 2021 tax return consequences. If you have assets above a certain threshold in the Netherlands and abroad, you will need to declare these in your 2021 tax return. If you had over 30,846 euros (single) in savings or investments on January 1, 2020, or 61,692 euros (couples) you need to pay taxes. A specialised tax advisor can make sure your tax return is filed correctly to avoid problems with the tax office. They can also support you with proactive tax advice to minimise your Dutch tax on assets.
Lennart Suurmond is a tax advisor at J.C. Suurmond & zn. Tax consultants. Need advice on the best way to file your 2020 tax return or pro-active tax advice for the coming years? Send them an email to present your situation!