Expat employees who satisfy certain conditions need not pay tax on up to 30% of their salary. Since 1 January 2019 qualifying workers may use this 30% facility for only 5 years.
Allowance for additional costs
The 30% facility is available to employees who are recruited from outside the Netherlands to work here temporarily. If they satisfy conditions for the 30% facility, they are exempt from paying tax on up to 30% of their salary. This government measure helps them cover the additional costs they incur from working in the Netherlands, such as travel expenses, additional housing costs and day-to-day expenses.
Shorter duration
The government has shortened the duration of the 30% facility from 8 to 5 years. Employees who arrived in the Netherlands in or after 2019 are able to apply the tax break for up to 5 years.
Reasons for the shorter duration
In 2017 the Ministry of Finance had the 30% facility evaluated by an independent consultancy. The conclusions of theevaluation were as follows:
- About 80% of expat employees use the facility for 5 years or less. Many of the remaining 20% are not in the Netherlands temporarily but stay for a longer period.
- In other countries with a comparable facility, the tax break is often available for 5 years.
- The additional costs that the 30% facility is intended to cover decline over time.
- A shorter 30% facility is less expensive but is almost as effective.
FAQs
The Foreign Earned Income Exclusion, or FEIE, is also known as Form 2555 by the IRS. This expat benefit allows you to avoid double taxation by excluding up to a certain amount of foreign earned income from your US taxes. In 2024, for the 2023 tax year, you can exclude up to $120,000 of foreign earned income.
Does the IRS go after expats? ›
Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.
Do US expats still pay US taxes? ›
Filing taxes as a U.S. expat
Even if you are a U.S. citizen living and working outside of the United States for one or more years, you still likely need to file a U.S. tax return. The United States subjects your worldwide income to U.S. income tax, regardless of where you live.
What happens if a US expat doesn't pay taxes? ›
The penalty for not filing your tax return is 5% of the amount of tax shown on the return for each month you have not filed, up to 25% of your tax owing. If you fail to pay, the IRS imposes a ½ percent penalty for each month that the amount remains unpaid, up to 25% of your total tax owing.
How can an expat avoid US taxes? ›
Avoiding U.S. Taxes While Living Overseas
You must renounce your citizenship in front of a diplomatic or consular officer at the embassy. You must sign a statement of voluntary relinquishment of U.S. nationality and submit it to the Department of State.
Which states do not tax expats? ›
States with no income tax for expats
- Alaska.
- Florida.
- Nevada.
- South Dakota.
- Texas.
- Washington.
- Wyoming.
Expats are more likely to face an IRS tax audit than Americans living in the US. By avoiding common IRS red flags, you can reduce your chances of being audited.
Do US expats get taxed twice? ›
The US is one of the few countries that taxes its citizens on their worldwide income, regardless of where they live or earn their income. This means that American expats are potentially subject to double taxation – once by the country where they earn their income, and again by the United States.
How much are US expats taxed? ›
For example, self-employed US expats and those who work for a US-based employer must file an expat tax return. For the 2023 tax year, the rate for expat employees is 7.65%. Self-employed expats, however, are responsible for both the employer and employee contribution, meaning that the total is double, (15.3%).
Do expats get Social Security? ›
If you earned Social Security benefits, you can visit or live in most foreign countries and still receive payments. Look up the country on the SSA Payments Abroad Screening Tool to be sure you can receive your payments.
What Is an Expatriate? An expatriate, or expat, is an individual living and/or working in a country other than their country of citizenship, often temporarily and for work reasons.
Do expats give up citizenship? ›
Nearly 1 in 3 American expatriates plan to renounce their citizenship or are "seriously considering it," according to a survey from Greenback Expat Tax Services. The burden of managing and filing U.S. taxes is the top reason why American expats are considering renouncing their citizenship, the survey found.
How to retire overseas and avoid IRS penalties? ›
Renouncing Your US Citizenship and Retiring Abroad
The only way to end your US tax obligations is to renounce your citizenship. Once you are no longer a US citizen, you will not be subject to US tax policy.
Do US expats get tax refunds? ›
One of the main ways an expat can receive a refund from the IRS is by claiming refundable tax credits. Two of the more common refundable tax credits claimed by expats are the child tax credit and earned income credit.
How much foreign income is tax free in USA? ›
However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023). In addition, you can exclude or deduct certain foreign housing amounts.
How much tax do expats pay in USA? ›
In addition to income taxes, self-employed expats must also pay the self-employment tax while living abroad. This 15.3% tax replaces the Social Security and Medicare taxes in an employer-employee relationship, and the FEIE or the Foreign Tax Credit doesn't offset it.
What countries require expats to pay taxes? ›
In most cases, expatriation tax is assessed upon change of domicile or habitual residence; in the United States, which is one of only three countries (Eritrea and Myanmar are the others) to substantively tax its overseas citizens, the tax is applied upon relinquishment of American citizenship, on top of all taxes ...
