AIRINC’s 7th Global Tax Chat took a spooky turn. But do not be afraid, we are here to help you when global tax issues feel scary. Today we covered the latest on the Dutch 30% ruling, the disappearance of CoC/A1 applications in the U.K. and we also took a look at the U.S.A. tax proposals affecting individuals.
If you didn’t get a chance to watch our show live, you can watch the recording by clicking on the link below.
The new coalition Dutch government is changing the rules once again for the so-called 30% Ruling. Based on an economic study commissioned by the government to study the impact of the 30% ruling on the Dutch economy, lawmakers have decided the tax concession is useful in attracting highly skilled talent to the Netherlands. The proposal would eliminate the tapering of the benefit and set the exclusion rate at 27%. There would still be a 5-year term limit, while tightening the criteria needed to qualify for the ruling. For 2024 and 2025, the exclusion rate will remain at 30%, and the 27% rate will apply beginning 2027. Eligible salary for the ruling is EUR 233,000 for 2024, and the salary is adjusted annually for inflation. Soon, we will call this the 27% Ruling!
Forms A1 and Certificates of Coverage for outbound UK employees are used for temporary assignees so that they remain in the National Insurance scheme and avoid paying social security in their host country. The application for these forms is primarily done online, using a web portal from the UK tax authority, His Majesty’s Revenue and Customs (HMRC). A number of tax professionals have raised concern over the last few months that some of the applications are misplaced by HMRC, despite receiving a confirmation number from the web portal. While HMRC has not explained why the applications are lost, they do instruct applicants to resubmit their request. It is estimated about 5% of recent applications are disappearing. Companies should take steps to track the application process to avoid delays in processing.
We are expecting proposed tax legislation in the United States will be brought forward during 2025. The current tax law, known as the Tax Cuts and Jobs Act (TCJA), is scheduled to expire at the end of 2025. If no congressional action is taken, the US reverts to the legacy tax law from 2017, that would result in tax increases for many individual taxpayers. Various tax proposals have been brought forward by both the Democratic and Republican parties during this election season — each with very distinct differences in tax increases, tax cuts, and tax incentives that are intended to promote the economy while keeping an eye on deficit spending. Any tax legislation will depend on the results of congressional elections for the House and Senate as well as the presidential race. AIRINC will continue to monitor US tax developments, and we expect we will be talking more about this in 2025.
Why are tax audits so scary? They can be time-consuming and expensive to deal with. Not only in terms of potential tax assessments, but also penalties and interest charges. Audits also typically involve administrative time and tax provider fees to compile requested documentation to support the tax declarations. In global mobility, generally, there are two different types of tax audits — individual taxpayer audit, and a broader payroll audit. Payroll audits will focus on whether taxable compensation is reported correctly, and appropriate withholding taxes are remitted properly. Global mobility teams can be proactive by ensuring assignment documentation is in place, including assignment letters, certificates of coverage, and employee payroll forms are completed and on file. For those assignees taking advantage of expatriate tax concessions, ensure that assignees meet all criteria to qualify. Other areas to investigate before the tax authorities reach out are remote workers and ‘phantom’ expatriates that are working outside their normal work location.
We hope that Rob's jokes do not give you nightmares. Stay tuned to the blog for the details of the next Global Tax Chat show in early 2025 and for all the latest tax update (why not subscribe?). Until then, remember, tax doesn't need to be scary when you have the global tax chat team to guide you.