Want to know everything about salary split?

Salary split with van oers

Salary split

If you work in different countries at the same time, you might find yourself paying taxes and/or contributions on your salary components in multiple countries. This is commonly known as a salary split, and might yield a higher net income. However, it can also work to your disadvantage if it means that you are wholly or partially excluded from certain facilities.

How does a salary split come about?

  • Based on the actual working situation (mandatory).
  • As a deliberate structure to gain a tax advantage (planned).

salary split with van oers

Guidelines and exceptions

Whether or not a salary split is created depends on whether the specific conditions are satisfied, either deliberately or by chance. The basic rules are simple, though each has its own exceptions. The outline given below provides a general impression.

Salary split: the basic principle

In general, to be eligible for a salary split, you must actually carry out work in two or more countries. Directors of foreign companies may have split salaries without actually working in the other country. If you spend more than half your time living in the country where you work, your salary will generally be taxed there. This does not necessarily mean that your employer must have an establishment there. If you spend less time living in the country where you work, another factor that comes into play is whether your remuneration comes out of the employer’s income there. For these purposes, ‘employer’ does not mean your formal employer only: a foreign group company also qualifies as your employer in some situations.

Taxes in different countries

If your salary is split across multiple countries, they will each have rights of taxation, and your employer will have to withhold and remit tax in each of them. This may work to your advantage if you can claim exemptions and apply the lower initial rates in the progressive tax brackets in multiple countries. If the initial rate in one of the countries is higher than the average effective tax rate in your country of residence, though, on balance you will lose out. If so, you might be able to avoid the salary split or find another way to structure it.

salary split with with oers

Social security: in which country?

If you work in multiple countries, you might find yourself a situation where you are covered by the social security system, or are required to pay contributions, in a different country. In a European context, this issue is governed by the regulations of the European Community. The general principle is that social security contributions may only be levied in one of the countries. Outside Europe, the situation is governed by separate tax treaties or else by national regimes.

Further issues to bear in mind

To understand the total effect of a salary split, you also need to map out aspects that are not purely tax-related, such as:

  • What employment law regime, whether optional or mandatory, applies?
  • How will the split affect your pension accruals and/or benefits?
  • How are fringe benefits (company car, telephone, pension) handled in the various countries?
  • Do any special rules apply (compensation facility with Belgium and Germany, directors’ rules, expat facilities)?
  • What does this mean for your health insurance?
  • What is your entitlement to benefits while you are on sick leave or if you are dismissed?
salary split with van oers

How will a salary split affect your situation?

Various important exceptions exist to the general principles. Another important factor is where you live and where you work. Ask us how these rules affect your situation; our experts are happy to talk to you and can usually explain the most important issues very quickly.

Thijs Bijlard
Thijs Bijlard | Tax director
Want to know more about Salary Split?
Reach out to our specialist. They are here to help you.