Newsalert EU Direct Tax Group CJEU Sopora judgment re 150 kilometre
www.pwc.com 26 February 2015 Newsalert EU Direct Tax Group CJEU Sopora judgment re 150 kilometre requirement in the Dutch 30% rule for foreign workers (C-512/13) EU Direct Tax Group The EUDTG is one of PwC’s Thought Leadership Initiatives and embedded in the International Tax Services Network. The EUDTG is a panEuropean network of EU tax law experts and provides assistance to organizations, companies and private persons to help them to fully benefit from their rights under EU law. On 24 February 2015, the CJEU handed down its decision in the Sopora case on the 150 kilometre (km) requirement in the Dutch 30% ruling for foreign workers with specific expertise. The Dutch Wage Tax Act contains provisions that allow employers to reimburse, exempt from tax, certain ‘extraterritorial costs’ to their foreign workers, which are the costs workers incur as a result of staying outside their countries of origin to work and live in the Netherlands. Should you be interested in receiving the free bimonthly newsletter, then please send an e-mail One important feature of the reimbursement of to [email protected] with “subscription EU Tax ‘extraterritorial costs’ is the so-called 30% News”. ruling which essentially deems the extra- For more detailed information, please do not hesitate to contact: Sjoerd Douma PwC Netherlands +31 88 792 4253 [email protected] Frederik Boulogne PwC Netherlands +31 88 792 6929 [email protected] Niek Schipper PwC Netherlands +31 88 792 6670 [email protected] Or your usual PwC contact Supreme Court referred preliminary questions to the CJEU on the validity of the 150 km requirement under free movement of workers. The CJEU held that, in principle, there is a restriction on the free movement of workers if EU workers are treated less advantageously than Dutch workers or workers residing less than 150 km from the Dutch border. The CJEU considered that, in general, any foreign worker, regardless of the distance to the Dutch border of his residence, is able to be reimbursed for extraterritorial costs upon specification and that the 30% ruling is in essence a measure of administrative ease (i.e. no specification of actual costs required). territorial costs of a taxpayer to be 30% of his wage tax base, and allows him to be reimbursed for these costs without having to specify the real amounts. Administrative ease was stated to be the reason for setting the reimbursable extraterritorial costs at 30%, without requiring specification. The CJEU found no restriction on the free movement of workers, but, importantly, this would be different if the referring court would find the 30% rule to systematically overcompensate workers qualifying for it (by allowing more deemed costs to be reimbursed than actually incurred). Should the referring court indeed find this -which is conceivable, Per 1 January 2012, qualification for the 30% then it remains to be seen how it will decide ruling not only requires a worker to have the case and whether it will extend the 30% specific expertise that is rare on the Dutch ruling to employees like Mr. Sopora. labour market, but also to reside more than 150 km from the Dutch border for two/thirds of the The CJEU held that considerations of an two-year period before commencing employ- administrative nature cannot justify a deroment in the Netherlands. One of the reasons for gation from EU law rules. According to CJEU the Government to introduce this requirement case-law, Member States cannot be denied the is to prevent distortions in the border areas. possibility to attain legitimate objectives by introducing rules which are easily managed A foreign worker that does not satisfy the 150 and supervised by the competent authorities. km requirement is not entitled to the deemed tax-exempt reimbursement of 30% of Sopora articulates that the 150 km extraterritorial costs (without specification), requirement cannot, in itself, amount to but he may still be reimbursed for the actual indirect discrimination or an impediment to extraterritorial costs he incurs and specifies. the free movement of workers. A simplification requirement is allowed (for the refer-ring court In this case, Mr. Sopora found Dutch to ascertain), unless those limits are set in such employment but did not qualify for the 30% rua way that that exemption systematically gave ling because he did not meet the 150 km rise to a net overcompensation of the extrarequirement. After several levels of appeal, the territorial expenses actually incurred. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. 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