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Clarification on the Low Income Tax Credit

Forum Salaris, an online platform which is run by Belastingdienst (the Dutch revenue service), has recently undated its guide with answers to frequently asked questions about the ‘lageinkomensvoordeel’ (Low Income Tax Credit) and ‘loonkostenvoordeel’ (Labor Costs Tax Credit). Amongst other things, the guide elaborates on the conditions for eligibility for the tax credits with respect to the hours worked. In 2021, an employee is eligible for a Low Income Tax Credit if (s)he is paid between € 10.48 and € 13.12 per hour, has not yet reached state pension age, and has worked at least 1,248 paid hours. The latter condition also applies to employees who started or ended their employment with an organization during this year.

Proportional

The 1,248 paid hours are not based proportionally on the time worked. Moreover, the condition that an employee must have worked at least this number of hours in order to be eligible for a Low Income Tax Credit applies separately per organization. This means that no exceptions are made even in the event of a company takeover or if employees switch organizations. If more than one payroll tax number (‘loonheffingsnummer’ in Dutch) is used for the same employee, this is merely an administrative matter; with respect to the Low Income Tax Credit, this does not translate into the employee working for separate organizations. In other words, the paid hours declared under different payroll tax numbers may be added together. The same applies in the event more than one IKV (income relationship number) is used for the same employee.

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