On Friday October 27^th 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 1^st 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 1^st of 2026.

As said, additional amendments were announced on October 27^th. and will also enter into force as per January 1^st 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 on a 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.