Know-how Breaking! Changes in the 30% ruling!

Breaking! Changes in the 30% ruling!

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 […]

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 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.