Fiscal Partnership for Expats: An HR Perspective

As an HR professional or a company looking to attract and retain international talent, understanding the tax benefits available for expats in the Netherlands is crucial. An essential aspect to consider is the concept of fiscal partnership, including its implications, eligibility criteria, and potential savings.

This article will provide insights into the concept of a fiscal partnership and other tax benefits for expats, including those in same-sex partnerships.

What is a Fiscal Partnership?

In the Netherlands, the concept of a fiscal partnership is defined by Dutch tax law and is dependent on individuals’ situations. When employees are married or in a registered partnership, they are automatically recognized as fiscal partners for Dutch income tax purposes.

This recognition extends to same-sex couples as well, as the Netherlands was the pioneering country to legalize same-sex marriage globally. This inclusive approach reflects the country’s commitment to respecting diverse forms of partnership and ensuring equality in taxation.

The Importance of Fiscal Partnership

Being recognized as fiscal partners allows your employees to optimize their tax positions by dividing certain income and deductions most beneficially. This can lead to lower taxes or a refund for the person to whom it is allocated. It is also possible to allocate some taxable income to a partner.

Who is eligible for Fiscal Partnership?

If your employees are living together (but not married), they are only considered fiscal partners when they are registered at the same address with the local municipality and meet at least one of the following conditions:

• They are both older than 18 years old and have a notarial cohabitation agreement
• They have a child together
• One of them has officially recognized the other one’s child
• They are eligible for each other’s pension plans
• They are co-owners of the primary residence
• They are both older than 18 years old and a minor child is registered at the same address
• They were fiscal partners in the previous year

Other Tax Benefits for Highly Skilled Migrant

Apart from being a fiscal partner, highly skilled migrants in the Netherlands can take advantage of other tax benefits:

1. 30% Ruling: This is a tax benefit that provides significant advantages to eligible expat employees in the Netherlands. It allows for a tax-free allowance of 30% of the salary, simplifies the taxation process, provides flexibility in housing and education expenses, and offers other benefits such as the mobility budget.
2. Childcare Allowance: The Dutch government offers childcare allowance (kinderopvangtoeslag) to offset these costs, with subsidies depending on family income, the number of children, and specific childcare expenses.
3. Rent Allowance: The rent benefit (huurtoeslag) is a government contribution towards your rental costs. It was initially designed for households with average earnings although most recipients are at the low-income level.

How HR Teams Can Facilitate this Benefit for Knowledge Migrants?

1. Understand the Concept: First and foremost, HR teams need to understand the concept of fiscal partnership in the Netherlands. This includes knowing that, if employees are married or in a registered partnership, they are automatically considered fiscal partners for Dutch income tax purposes.
2. Identify Eligible Employees: HR teams should identify employees who are living together but not married. These employees are only considered as fiscal partners when they are registered at the same address with the local municipality and meet at least one of the conditions mentioned before.
3. Facilitate Tax Declaration: HR teams can facilitate the tax declaration process for their employees. In the Netherlands, completing your tax declaration (Belastingaangifte) can be done online as from the 1st of March. HR teams can provide guidance and resources to help employees complete their tax declarations.
4. Provide Information on Tax Benefits: HR teams should provide information on the tax benefits of being a fiscal partner. This includes the ability to optimize tax positions by dividing certain income and deductions most beneficially.
5. Consult a Tax Advisor: It’s always recommended to consult with a tax advisor to ensure you’re making the most of these opportunities.

Make Your Company More Attractive to Highly Skilled Migrants

Supporting highly skilled migrants in maximizing the benefits of their status is crucial for companies looking to attract and retain top international talent. Providing them with specialized guidance from a tax advisor can be highly beneficial in navigating complex tax laws, taking advantage of incentives, and ensuring compliance with regulations.