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Home » Reader question » Disappearance of payroll tax credit for Dutch nationals abroad as of 1 January
Dear readers,
A few days ago I asked the question about the disappearance of the payroll tax (discount) as of 1-1-2019. Several people responded that only the payroll tax credit will disappear, but upon inquiry at the SVB in Roermond, it appears that the entire payroll tax will disappear and you will not get it back through taxes.
For a single person, this means that you will receive € 219 less per month on your net AOW (and you will therefore have something of € 900 left over). To me, that's pretty scary. Please respond etc. from other singles with state pension in Thailand.
Another addition: At the tax office they say that the payroll tax credit will disappear for people abroad and with it the payroll tax. All very confusing to me, but who is smarter at that?
Regards,
Do
If you don't understand Wil, then you better hire a tax advisor, I think.
Dear Will, I don't mean to worry you, but tax credit for people permanently residing in Thailand has been abolished quite some time ago. Hopefully you will not receive an additional assessment of the state pension that is, in principle, paid too much by law. Fingers crossed I say. I would at least reserve some coins just in case….
Payroll tax is payroll tax and national insurance contributions to be paid together. If you live in Thailand, you do not pay national insurance contributions. You don't have to do anything about this, because everything is done automatically via your annual tax statement. The payroll tax credit has not been applicable for several years now. No senior discount. Nevertheless, you will have more net left over than if you had continued to live in the Netherlands.
It makes no sense to juggle with all kinds of information in a misunderstood and/or manipulated way.
As of January 1, you pay only 20.385% wage tax on your total income up to an amount of EUR 9.
That is EUR 1.835. You pay 37,05% wage tax on the rest of your income.
Thus: if you have an income of EUR 30000, you pay a total of EUR 1835 in the first bracket; on the excess you pay 37,05% of EUR 9.615 is EUR 3.562. Total: EUR 5.397 That is per month: EUR 450
So you are left over per month: EUR 30,000/12 = EUR 2.500 minus EUR 450 makes EUR 2.050
Amounts are rounded and gross, so including holiday pay.
No matter how you look at it: you would have had less left over in the Netherlands!
I suspect that the 37,05% you mentioned is the total payroll tax, including national insurance contributions, etc. In my opinion, the percentage of the payroll tax itself is considerably lower!
The stated % of 37,05 concerns the 2nd bracket: the excess above EUR 20.835. For many years this has not included a premium. This is already settled in the 1st bracket.
What I forgot to mention is that in Thailand you also do not pay a ZVW contribution, which will be 6,95% next year. In my calculation in the previous response, it has of course already been calculated.
This is not correct, Ruud.
You are living in the Netherlands within both the 1st and 2nd bracket. national insurance premiums due. It will only be canceled from the 3rd instalment
Incidentally, a percentage of 37,05% does not appear in any table.
Wil has reached state pension age. For him, when living in the Netherlands (which is still the case today), a joint percentage of 18,65%, 22,95%, 40,85% and 51,95% applies in resp. the 1st through the 4th disc.
After emigration, the payroll tax percentages are 8,90%, 13,20%, 40,85% and 51,95% in resp. the 1st through the 4th disc.
The situation I am describing is that of living in Thailand, because that is what the questioner's concern was about. On: https://financieel.infonu.nl/ all kinds of information can be found about the level and development of tax brackets in 2018, 2019 and the progression to 2022. The percentage of 37,05 is then more important than that of 2018.
Unfortunately Ruud, you pile one mistake on another and now compare apples with pears. You scare the crap out of your readers.
The percentage of 37,05% used by you is the percentage that belongs to the SECOND bracket starting in 2021 and with a bracket length of € 36.153 up to and including € 68.507.
This is comparable to the current THIRD bracket with a percentage of 40,85% and a length of € 34.404 up to and including 68.507. In other words: the tax burden will then be reduced by 3,80%. And that's a whole different story!
I did not open your link, but I also prefer to use the Tax Plan Act 2019, which you can download with the following link:
https://www.rijksoverheid.nl/documenten/kamerstukken/2018/09/18/belastingplan-2019
then scroll to page 14.
In the previous pages you will find the tax percentages as I have already mentioned them for the years 2019 and 2020.
Dear Will,
This is a very confusing story. You say that both the payroll tax credit and the payroll tax will lapse if you live abroad. However, that is not correct.
Payroll tax is the (wage) tax and national insurance contributions owed and the payroll tax credit is a reduction of the tax and premium owed. However, from 1 January 2015 you are no longer entitled to tax credits when living in Thailand. The fact that the SVB still applies these discounts to you is a common mistake. You are lucky that this has not yet been discovered by the Tax Authorities during an inspection.
Incidentally, the amount of loss of income is considerably less than the € 219 you mentioned. You probably got this amount from the SVB website, but, as I mentioned, the payroll tax credit consists of two parts, namely a tax and a premium part. If you live outside the Netherlands, the national insurance contributions and therefore also the premium component of the tax credits will lapse.
I cannot say what the loss of income means to you. That is different for everyone, but amounts to 8,9% for 2018 (2019 9,1%) wage tax. This will then increase to 9,4% in 2022. Calculated over a full year, this means a loss of income of more than one month of AOW benefit.
Thanks for the clear and reassuring story. Still don't understand why they are talking about 1-1-2019 with that payroll tax credit while it has been abolished for a number of years. But it also appears that both the SCB and the tax telephone do not know what they are talking about!!! Now know that I get about € 1100. = less per year and have to make sure that I have that extra on my account when the visa is extended. Do not emigrate until 1-2-2019, so a possible additional assessment of the tax is not an issue.
You may still be able to opt for resident taxpayer status for 2019.
That saves another 1100 euros, unless you have a lot of savings.
But that is a matter of calculation.
When I emigrated that was still possible, whether that has changed in the meantime, I dare not say.
If you want to transfer a large amount to Thailand, I would still do it in 2018, if you have not stayed in Thailand for 180 days this year.
This year you are not yet taxable in Thailand and you can therefore not run into the problem that the Thai tax authorities – rightly or wrongly – want to levy tax on that money.
No, Ruud, it hasn't worked that way for a long time.
As of the 2013 tax year, you are entitled to time-proportionate tax credits upon emigration or return to the Netherlands. Wil emigrates as of 1 February. This means that he is entitled to apply the tax credits for the 30/360 portion.
Other than that, the tax credits applicable to him are considerably higher than the € 1.100 you mentioned. You only assume the general tax credit, but Wil is also entitled to the elderly person's tax credit and if I look at the reduction in income he expects, he is also entitled to the single elderly person's tax credit. And then you have to multiply the amount you mentioned by about 2,5.
In addition, with effect from the 2015 tax year, the option to be treated as a resident taxpayer has lapsed.
Your second comment is entirely justified (and very useful!). And if you therefore do not have to contribute all your income in 2019 to Thailand in 2019, then you do not owe any PIT on this. And if you also do that in the following years, this can lead to a nice tax saving.
Hi Ruud, A question about your last comment. It was actually my intention in February 2019 to transfer €8500.= to a Thai bank account that I then open there. Do you know what % that tax will be? Maybe I should send that amount to a friend, who will then pay it back to me later. Or bring cash to avoid the tax?
Greetings, Wil
Hi Will,
As far as the tax burden in Thailand is concerned, it depends, just like in the Netherlands, on the amount of your taxable income. The Thai tax system has 8 brackets. You first determine your annual income. Please note that your AOW benefit is also taxable in Thailand (although I have the impression that most Dutch people do not declare their AOW benefit, but limit this to their company pension).
You then reduce your annual income by 50%, up to a maximum of 100.000 THB. Then you deduct an amount of 60.000 THB for personal deduction (I assume that you are a single person). What then remains is your taxable income, as I expect that you are not eligible for other reductions.
The PIT is then over the first 150.000 THB 0%, up to 300.000 THB 5%, up to 500.000 THB 10%, up to 750.000 THB 15%, up to 1.000.000 THB 20%, up to 2.000.000 THB 25%, up to 5.000.000 THB 30% and above 35% (always calculated on the excess of the previous bracket, of course)
Good luck with the calculations.
Lammert, I believe there is an additional exemption of 64 thb for 190.000+ and/or disabled. It still existed during my last years in Thailand.
Then calculate the max 100.000 expense deduction income, 60.000 personal exemption, 190.000 old age exemption and 150.000 zero percent bracket and you arrive at half a million baht without tax. At exchange rate 37, that is 1.126 euros per month.
Your comment about the state pension is interesting; In my opinion you are right, but Heerlen has informed me that only national legislation applies to the AOW. I have that letter from a civil servant (Mr A, for the sake of completeness). There have already been noises in this blog that the Thai tax authorities also wanted to tax the state pension and I am very curious how the arbitration and consultation article will turn out.
Maybe someday there will be a new = better treaty so that we can get rid of this discussion. This treaty from 1975 is very old. And now that the Prime Minister General has been allowed to join the EU, Thailand may be 'allowed' again and NL can restart the broken negotiations.
No, Erik, I hear and read this often, but it doesn't work that way. There is no additional reduction for someone aged 65 or older or a disabled person of THB 190.000.
Thai tax law has the provision that as a 65-year-old or disabled person with a taxable income of up to 190.000 THB, you are exempt from paying the PIT. You can basically think of this as stretching the first tranche from 150.000 THB to 190.000 THB. But that is different from a general reduction, regardless of the amount of your taxable income. If you have a taxable income of 190.100 THB, you owe tax on 40.100 THB.
As far as the Netherlands is concerned, national law does indeed apply to the AOW benefit. This is due to the fact that the Treaty concluded with Thailand does not contain any provision regarding social security benefits, nor does it contain a so-called “residual article”. But what applies to the Netherlands also applies to Thailand. As part of your worldwide income, Thailand may also levy on this. After all, the tax on the state pension is not allocated to one of the two countries by treaty.
I recently had extensive contact with one of the major tax consultancy firms in Thailand about this.
Dear Will,
Put it to the test and call the tax telephone 5 times with the same question. You will receive 5 different answers and if you choose the most appropriate answer for you, the inspector will know a 6th solution when processing your declaration (which usually turns out to be the only correct one).
You still have to emigrate. This means that the loss of income with regard to your AOW benefit is also considerably less than the € 1.100 you mentioned. After all, for you, in addition to the national insurance contributions, the income-related contribution to the Healthcare Insurance Act will also lapse. Your final loss of income will be around €480 (about €40 per month).
PLEASE NOTE: you will of course no longer fall under the Health Insurance Act, which means that you must make provision for medical expenses in Thailand. But I assume you know that.
Why this amendment to the law as of 1 January next, while the tax credits for living in Thailand have already expired from 2015? Every year, the Tax and Customs Administration discovers a large number of cases in which tax credits were applied without entitlement. Without mentioning the SVB (namely the SVB), it has therefore been announced in the 2019 Tax Plan that, when living abroad, tax credits may no longer be deducted from the wage tax.
With this measure that has proven to be necessary, the SVB is nicely put on display (if they understand the background of this measure, but which I have a hard head about).
The tax credit disappears -when living abroad- only in the wage tax; an assessment of whether you are entitled to it takes place at the time of the assessment. But if you live in Thailand, you are not entitled to any tax credit and that has been since 1-1-2015.
If you did receive a tax credit on your monthly state pension in the years 2015 to 2018 and living in Thailand, you must take into account repayment on the assessment that you will receive.
For more information, I refer you to previously asked questions here and the answers to them. I'm surprised, Wil, that you would call the SVB. You have to go to the tax office Heerlen or the tax telephone.