UK: Horizons - International News for Employers and International Secondees

Last Updated: 2 November 2005
Article by Rob Essex, Jans Carstens, Andy Foskett, Andy Hodge, Philip Paur and Neil Rogers

Most Read Contributor in UK, August 2017

Netherlands: New decree on the 30% tax ruling

Assignees to the Netherlands who meet the qualifying conditions can apply to have 30% of their remuneration exempted from Dutch income tax.

Previously the 30% ruling could be applied for by the non-Dutch employer where individuals were seconded to the Netherlands between intra-group companies. The assignee would remain employed by the foreign company but payroll would be administered by the Dutch company, which would apply for the ruling. Under the decree this is no longer possible, and the application must now be made by the legal employer. This would require the foreign company to set up and administer a Dutch payroll, or a local employment contract to be used. Recently however, the Dutch State Secretary of Finance, Joop Wijn, announced that the requirement for foreign companies to register for wage tax purposes is to be withdrawn in the near future.

The following additional changes have been made:

  • A tax-free allowance may be granted to secondees to the Netherlands or to local employees, to cover the additional costs of working outside the Netherlands. This allowance is not available if an employee already benefits from the 30% ruling.

  • The employment contract must specify the amount of the allowance which qualifies for tax-free status. The allowance may be provided wholly or partly as a benefit in kind. It may be necessary to reduce salary to accommodate the allowance.

  • A bonus received after the 30% ruling period has expired may still benefit if the employee was unconditionally entitled to it at the end of the ruling period.


The situation for new assignees to the Netherlands is at present unclear, although Mr Wijn’s announcement should mean that the home employer will not have to set up Dutch payroll administration. Assignment arrangements should be reviewed where the 30% ruling is applied for, in order to maximise the benefit obtained.

China: Change to immigration requirements for Foreigners working in Shanghai

The practices of local immigration and labour bureaus in China vary from region to region. There are two primary variations:

Route 1 – All individuals must obtain a Z visa prior to arrival in China.

Route 2 – Individuals can arrive on the F visa. With immediate effect, the authorities in Shanghai will only allow applications for the F visa for "qualifying" persons, including (with certain documentary evidence:

  • Personnel performing technical projects at state or municipal level, or under important engineering agreements, talent exchange programs, or non-paid aid agreements between governments;

  • Personnel occupying a position higher than deputy general manager;

  • Certain senior manager, managers and technicians dependent on their position and/or the registered capital of the company; and

  • Personnel employed by multinational corporations with their regional headquarters in Shanghai.

Separately, the State Administration of Taxation (SAT) in China has recently requested that regional tax authorities take steps to ensure that companies document and report all income earned by employees and expatriates, regardless of amount and whether subject to tax.


Employers of assignees should ensure that they review their visa application processes for Shanghai. International organisations with assignees or entities anywhere in China should examine their internal filing, HR, compensation management systems, and their tax reporting positions, to ensure they are compliant with the regulations.

UK: National Insurance Contributions and Cross-border Share Options

Where an employee is granted a share option while resident in the UK, and subsequently exercises it after having become insured in another EEA member state, HM Revenue and Customs (HMRC) maintain that Class 1 NICs are due on the exercise gain. This controversial view, for which there is little apparent support in either the EU Regulations or in other member states, was set out in a Special Tax Bulletin issued in May 2005.

Pending resolution with the other member states, the HMRC’s position may result in double contributions liability, and although the Bulletin indicates that HMRC will work with the other country to avoid such a double liability any such process will leave both the employer and employee with uncertainly over their overall social security cost. We have recently learned that HMRC have entered into discussions with counterparts in Denmark and France with a view to demonstrating to the European Commission that the stock option question is a problem that should be specifically addressed by the EU.


There is little apparent support elsewhere in the EU for the HMRC’s position. Authorities in most other EEA states will expect to see social security applied to stock option gains by the country of coverage at the point of exercise, as opposed to the HMRC’s view that it should be the country of coverage at grant that determines the contribution liability. Where this results in a double liability in relation to a specific exercise, UK employers should bring this to the attention of their usual Deloitte contact, or one of the contacts given at the end of this publication.

Indonesia: Accountants held by police following dispute over work permits

Two Malaysian accountants who were sent to carry out a due diligence study at a client in Indonesia were held in prison for 50 days by police following claims that they had breached Indonesian visa regulations.

The Indonesian immigration rules stipulate that visas are not required for individuals of certain countries for business visits. The accountants’ trip was deemed by the employer to fall within the definition of a business visit and therefore visas were not thought to be required and were not obtained. Indonesian police claimed that they were in fact employed by an Indonesian company and entered the country without a valid work visa.

Lawyers working on behalf of the accountants have now successfully secured the release of the two accountants.


Although all charges were dropped, and no law appears to have been broken, this incident highlights how important it is for companies to review immigration laws carefully before sending individuals to work in overseas locations.

USA: IRS announcement on equity Plans

The Internal Revenue Service has recently withdrawn draft regulations published in 2001 which would require employers to operate FICA and FUTA withholding on statutory stock options (the exercise of incentive stock options (ISOs) and options granted under employee stock purchase plans).


Companies should rescind any changes previously made in anticipation of the 2001 proposed regulations. It should be noted that there remains a requirement to report such income in the employee’s gross income on Form W-2.

Germany: Proof required for treaty Relief

In a ruling dated 21 July 2005, German tax authorities have indicated that taxpayers making double tax treaty claims exempting income from taxation on their German tax returns will have to provide proof of foreign taxation, or that the other jurisdiction has renounced its taxation right e.g. has issued a concession.

Usually proof of payment of foreign tax would consist of a foreign tax assessment accompanied by a receipt for tax paid. However, subject to certain requirements, tax equalised employees can provide instead a certificate from their employer that foreign tax has been paid.


Without the necessary proof the income in question will be subject to German tax. The requirement to have suffered foreign tax does not affect the application of German wage tax withholding rules, which remain unchanged.

France: ECJ decision prevents France from restricting flat rate withholding tax to French institutions

A decision by the European Court of Justice (ECJ) has forced France to adopt new measures relating to interest payments. As a result, it may be possible to obtain a partial reimbursement of French tax paid on interest income paid after 1 January 1999 and derived from European investments outside France. Such payments should have benefited from the preferential 16% withholding tax rate previously only available for investments with French institutions 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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