Foreign employees hired by a Dutch employer can be entitled to the so called 30% tax ruling. This means that 30% of the gross income is being paid without any taxes withheld on that part. This is results in a much higher nett spendable income.
On Friday October 27th of 2023, the Dutch Parliament adopted two disruptive amendments to the 2024 Tax Plan with regard to the 30% ruling. On December 19th, the Tax Plan 2024 including these amendments was approved by the Senate and is now final. What are the changes?
Background information on the 30% ruling:
The 30% tax ruling (or 30% facility) is the main tax advantage for expats coming to The Netherlands. It provides for a tax-free allowance to an extent of (up to a maximum of) 30% of the salary. Having the 30% ruling also allows the expat for an exemption on the Dutch wealth tax on worldwide assets and Dutch tax on substantial interest income from foreign entities: this is called the partial foreign taxpayer scheme. The term of the 30% ruling is 5 years. Expats will need to meet certain criteria to be entitled to the 30% ruling.
Scaling back the 30% ruling
Last year it was announced that, as from January 1st of 2024, the salary to which the 30% ruling can be applied will be capped at the so-called Balkenende-norm (named after a former prime minister): this is the maximum salary for public servants. The Balkenende norm salary is indexed each year and will amount to € 233.000 gross in 2024. A transitional arrangement applies for employees who had an active 30% ruling in December 2022: the cap will only apply to them as from January 1st of 2026.
As said, additional amendments were announced on October 27th. and will also enter into force as per January 1st of 2024.
Firstly, the 30% ruling will get a graduated scheme: A 30% tax-free allowance applies in the first 20 months, a 20% tax-free allowance for the next 20 months and a 10% tax-free allowance for the last 20 months of the five year term. A transitional arrangement applies to employees to whose salary the 30% ruling is applied in December 2023; these employees will not be confronted with these adjustments during the term of their ruling.
Secondly, the amendment will terminate the aforementioned partial foreign taxpayer scheme for 30% ruling holders as of 2025. This means that the exemption on foreign-based Box 2 income (tax on income from more than 5% shareholding) and Box 3 income (tax on the deemed income of worldwide assets) will end. Here too a transitional arrangement applies to employees to whose salary the 30% ruling is applied in December 2023: they will only be confronted with this change as per 2027.
It's important to know that - if an employee that has the 30% ruling changes employers during the term of the ruling – he/she can still use the abovementioned transitional arrangement if he/she enters into a new qualifying employment with a Dutch employer within 3 months.
From 2022, the taxable salary for an employee can't be under €39,647. A minimum salary of €30,001 is applicable for those who have completed a Master's degree and are younger than 30 years old. This means that by taking into account the 30% tax ruling, your salary can't become less than these amounts. Furthermore, for scientific researchers, employees working in scientific education or doctors in training, no minimum salary is required. Please note that there are restrictions regarding the companies or institutions for which this group of employees can work.
The application for the 30% rule must be made within 4 months after starting in the job. If the application is made after the four months period the ruling can only be granted from the next month after the application. This longer period is then deducted from the maximum period of 8 years.
During the 8 years period the Revenue Service is entitled to check if the employee still meets the criteria of the ruling. If not then the ruling is ended.
Employees working in the Netherlands under the 30%-ruling are entitled to the following tax advantages:
1. approximately 30% of their gross salary is paid as a tax-free '30%-cost reimbursement';
2. for other income elements than salary, they can choose for the so-called deemed non resident taxation.
3. Capital gains (e.g. on the sale of a real estate or shares) are not taxable in the Netherlands.
The taxation on Item 2. depends on whether the employee is considered a resident tax payer or a non-resident tax payer. In principle:
1. resident tax payers are employees who are living in the Netherlands;
2. non-residents tax payers are employees who are not living in the Netherlands.
Practically every resident taxpayer in the 30%-ruling will choose for the so-called partial taxation. This means that only a limited number of income elements are taxed in the Netherlands, like: a. the salary from Dutch and if applicable also foreign employment (incl. a company car);
b. income from a main residence in the Netherlands. (if your main residence is abroad, you normally are a non-resident.);
On the other hand, they are entitled to deduct extraordinary expenses like medical expenses, major charitable donations and alimony payments. And besides that they have the claim on the general tax credit for their spouse (so-called 'heffingskorting').
In principle you are considered a non-resident if you and/or your spouse and family are (still) living abroad (outside the Netherlands). Although you have the option to be considered a resident taxpayer. Therefore we will give you some general remarks regarding these 2 different fiscal options:
a) non-residents are not liable for Dutch taxation for foreign working days, holidays and sick days (this means days spent outside the Netherlands). These days are taxable in their home country. The difference in the Dutch and home country tax rates could lead to a tax benefit; or
b) non-residents have the option to be taxed like resident tax payers (partial taxation like in Item 1.). This implies that they loose the opportunity to deduct the foreign days as mentioned earlier, but might be able to deduct the mortgage interest in their foreign home. The request for the partial taxation can be made together with the application for the 30%-ruling, but ultimately when the tax return is filed.
You can claim the 30% tax ruling for 5 years. This has changed in 2019. Before this used to be 8 years.
This is not a problem, you do have to reapply for the 30% ruling. If your conditions didn’t change this will be ok.
No, unfortunately. The rule is only for employees.
When you benefit from the 30% ruling, it is possible to exchange your foreign driving license for a Dutch license without having to take the test again.
The 30 tax ruling is available for employees who are recruited from outside the Netherlands to work temporarily here. Depending the conditions of the 30% facility, they are exempt from paying tax on up to 30% of their salary.
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Suurmond Taxconsultants is a tax advising company in The Netherlands, near Rotterdam. Don’t miss out on any Dutch tax relief possibilities! Contact our experts now for cutting edge tax advice in international situations.
The Dutch tax advisors at Duijn’s Tax Solutions have been providing businesses and individuals with Dutch tax advise in The Netherlands for over 15 years. We provide a broad range of Dutch tax consulting services. Through our international tax network of tax advisors, we are able to provide seamless cross border tax advice to over 100 countries.