If you work for an international organisation, you may be eligible for the ‘diplomatic exemption’. Foreign employees of international organisations may enjoy tax exemptions in the Netherlands.
Tax exemption: the diplomatic exemption
The diplomatic exemption, part of the Vienna Convention on Diplomatic Relations, provides diplomats and staff of international organisations with certain tax privileges. The Netherlands has reached agreements with several international organisations based in the Netherlands on tax exemptions for their employees.
International organisations and tax exemption in the Netherlands
The Netherlands is home to a wide spectrum of international organisations, including legal institutions such as the International Court of Justice, EU institutions such as the European Medicines Agency and Europol, and other organisations such as the European Patent Office (EPO). Specific agreements, such as the headquarters agreement with the EPO, allow employees of these organisations to enjoy tax benefits.
How the diplomatic exemption works out in the Netherlands
Did you come from abroad and have AO status or BO status? If so, various tax exemptions apply. These exemptions are linked to your residence status in the Netherlands and can range from full to partial exemptions from income tax, sales tax, and other taxes. The specific benefits depend on your personal situation.
Besides the exemption for your international organisation salary in box 1 (income from work and home), the scheme includes partial exemptions in box 2 (concerning substantial interest) and box 3 (income from savings and investments). Moreover, you can enjoy (partial) exemptions for turnover tax, excise duties, import duties, motor vehicle tax and gambling tax.
Important for employees, their partners and family members
There are important tax concerns for employees of international organisations with income from multiple sources. It is essential to be aware of possible tax consequences. Particularities may arise with income relating to the Netherlands (and therefore not exempt), income from abroad (and tax treatment abroad), as well as the combination with entrepreneurship and/or investing. The tax position is also relevant for their partners and family members, as they may also be (partially) exempt.
Conclusion
The tax arrangements for employees of international organisations can increase your net income, but also sometimes make your situation and return more complex. If you work at an international organisation, it is wise to seek professional advice to optimise your tax position. We are ready to help you assess your situation and prepare your tax return.
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