Newsalert EU Direct Tax Group CJEU Sopora judgment re 150 kilometre

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Newsalert EU Direct Tax Group CJEU Sopora judgment re 150 kilometre
26 February 2015
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
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
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%
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
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.
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