FAQ: Brexit and the Influence on Dutch Wage Tax, Income Tax and Social Security Regulations

We have made a distinction between two situations:
1. That you were already in a cross-border situation between the UK and the Netherlands before 2021 and will continue to do so in 2021.
2. The situation that you will start the cross-border situation between the UK and the Netherlands after January 1st, 2021.

Please note that it is not yet clear if and how any changes in circumstances, due to Covid-19, will play a role in the cross-border situations as mentioned below. We strongly recommend to keep a close eye on the developments.

FAQ: I was already in a cross-border situation between the UK and the Netherlands before 2021 and will continue to do so in 2021.

1. Will the Brexit-deal affect my Dutch income tax?
Possibly. For residents of the Netherlands, the existing European regulation will still be applicable as long as the situation remains unchanged.

If you were a resident of the UK in 2020 and met the conditions to be regarded as a qualifying non-resident taxpayer of the Netherlands, you were entitled to the same tax deductions as a resident of the Netherlands. This will remain the case in 2021 as long as nothing changes in your situation. If you were entitled to the tax part of the labor rebate and the tax part of the combination rebate in 2020, then you are still entitled to these benefits in 2021, provided that nothing has changed in your situation.

There is however an exception for employees who have been assigned from the UK to the Netherlands, but continued to live in the UK. It has been decided that EU law will no longer apply to this group of employees from January 1st, 2021, as a result of which these employees will no longer meet the conditions to be regarded as a qualifying non-resident taxpayer of the Netherlands and consequently, are no longer entitled to the same tax deductions as resident taxpayers of the Netherlands. As from 2021 you will also no longer be entitled to the tax part of the labor rebate and the tax part of the combination rebate.

The tax treaty between the Netherlands and the UK will remain applicable.

2. Will the Brexit-deal affect the Dutch wage tax withheld?
Possibly. Residents of the UK who worked for a Dutch employer and who will continue to do so in 2021, will still be entitled to the tax part of the labor rebate in 2021. In this situation it is still possible to apply the wage tax tables for employees from an EU country in 2021 Dutch payroll.

An exception applies to employees who have been assigned from the UK to the Netherlands. It has been decided that EU law will no longer apply to this group of employees from January 1st 2021, as a result of which the employees concerned will have to be included in the wage tax tables for employees from third countries. In that situation, you will no longer be entitled to the tax part of the labor rebate, which has to be processed in the 2021 Dutch payroll accordingly.

3. Will the Brexit-deal affect my social insurance position?
No. The regulation of the Withdrawal Agreement will remain applicable, which implies that all the European rules from the Regulation will continue to apply on your social security position. Your pending A1 declaration will remain valid. It is expected that it remains possible to extend pending A1 declarations, provided that your situation remains unchanged.

4. Will the Brexit-deal affect my protective assessment in connection with my relocation to the UK?
No. The protective assessment will remain unchanged when the tax assessment relates to tax years up to and including 2020. There is no need to request for suspension of payment and no security for payment needs to be provided to the Dutch tax authorities.

FAQ: I will start a cross-border situation between the UK and the Netherlands after January 1st, 2021.

1. Will the Brexit-deal affect my Dutch income tax?
Yes, but only if you are a resident of the UK. If you start working in the Netherlands from the UK after January 1st, 2021, you no longer meet the conditions for a qualifying non-resident taxpayer status in the Netherlands. This means that you are not entitled to the same deductions as a resident taxpayer of the Netherlands. In addition, you are not entitled to the tax part of the labor rebate and the tax part of the combination rebate.

2. Will the Brexit-deal affect the Dutch wage tax withheld?
Yes. Residents of the UK who started working for a Dutch employer as from 2021 are not entitled to the tax part of the labor rebate. The wage tax tables for employees for third countries will have to be applied in the 2021 Dutch payroll administration. This also applies to UK residents who will be assigned to the Netherlands, but continue to live in the UK.

3. Will the Brexit-deal affect my social insurance?
Yes. However, it must be noted that the Brexit-deal is predominantly in line with the existing European rules (which are included in the EU Regulation 883/2004). Based on the Brexit-deal you will only be socially insured in one state and you are generally insured in the state where you perform your activities.

Work in multiple states
If you work in multiple states, also under the new Brexit-deal, you will be(come) socially insured in your country of residence in case you perform at least 25% of your activities in the country of residency. You can apply for a so-called Certificate of Coverage in your country of residency.

Assigned workers
Assigned workers remain socially insured in their home country, provided that the duration of the posting does not exceed a period of 2 years. Before the Brexit-deal, it was possible to extend the term of 2 years up to a maximum of 5 years. The Brexit-deal does not include the option to extend. This will lead to a host country coverage for postings exceeding 2 years. Furthermore, the Brexit-deal does not provide for any arrangements regarding accompanying partners.

Finally, each EU state will have to indicate before February 1st, 2021, whether it accepts the assigned worker rules as described in the Brexit-deal. If the Netherlands does not agree, you will immediately become socially insured in the work state as from the start of your assignment.

4. Will the Brexit-deal affect my protective assessment in connection with my relocation to the UK?
Yes. You will need to request for a suspension of payment and provide security of payment to the Dutch tax authorities.