The Dutch House of Representatives on October 26 voted to reduce the scope of the benefits provided by the 30% ruling, which offers tax advantages to highly skilled foreign workers in the Netherlands, effective 1 January 2024.
In addition, the House of Representatives also voted to abolish the exemption for certain expats from the tax on net worth -- in Box 2 and Box 3 of the Dutch individual income tax return -- as of 1 January 2024.
Currently, some foreign employees with specific expertise deemed scarce in the Netherlands can receive a tax benefit, known as the 30% ruling. If this arrangement is granted (upon application) by the tax authorities, those employees may receive a maximum of 30% of their remuneration free of tax, for a maximum of 60 months. The 30% portion of their salary remains untaxed based on the notion that it is meant to cover “extraterritorial expenses” (often referred to as ET costs), the additional costs expats incur by working (temporarily) outside their country of origin.
Under the new proposal, the 60-month period is reduced to a maximum of 20 months. For the next 20 months, employees that qualify would receive 20% of their remuneration -– rather than 30% -- tax-free. Then, for a final period of 20 months, the percentage of tax-free remuneration would be 10%, instead of 30%.
The new rules would provide a transitional period for expats who have already been approved for the 30% ruling. Employees who, under the 30% ruling, received in December 2023 untaxed payments of part of their remuneration, would remain entitled to a 30% reimbursement for ET costs throughout the duration of the period for which he or she received the 30% ruling.
The reduction in the period of applicability of the 30% ruling does not affect the previously announced capping of the 30% ruling at the level of the WNT standard (EUR 233,000 in 2024).
Supporters of this initiative believe this reduction of the 30% ruling benefits could yield approximately EUR 200 million in taxes annually from 2029 onwards. The amendment provides that these tax revenues would be used to fund lower interest rates on student loans.
Foreign employees who have been granted the 30% ruling are currently allowed (at their option) to declare their income in Box 2 and in Box 3 of the income tax return as if they were not resident in the Netherlands. This is the so-called partial non-resident taxpayer status. The House of Representatives also voted to abolish this provision as of 1 January 2025. Again, there will be a transitional arrangement so that employees who, under the 30% ruling, received in December 2023 an untaxed payment of part of their remuneration, may continue to opt for the partial non-resident taxpayer status until 31 December 2026.
Peter Bos
Robin Schalekamp
Saskia Reijmers
BDO in Netherlands
In addition, the House of Representatives also voted to abolish the exemption for certain expats from the tax on net worth -- in Box 2 and Box 3 of the Dutch individual income tax return -- as of 1 January 2024.
Currently, some foreign employees with specific expertise deemed scarce in the Netherlands can receive a tax benefit, known as the 30% ruling. If this arrangement is granted (upon application) by the tax authorities, those employees may receive a maximum of 30% of their remuneration free of tax, for a maximum of 60 months. The 30% portion of their salary remains untaxed based on the notion that it is meant to cover “extraterritorial expenses” (often referred to as ET costs), the additional costs expats incur by working (temporarily) outside their country of origin.
Under the new proposal, the 60-month period is reduced to a maximum of 20 months. For the next 20 months, employees that qualify would receive 20% of their remuneration -– rather than 30% -- tax-free. Then, for a final period of 20 months, the percentage of tax-free remuneration would be 10%, instead of 30%.
The new rules would provide a transitional period for expats who have already been approved for the 30% ruling. Employees who, under the 30% ruling, received in December 2023 untaxed payments of part of their remuneration, would remain entitled to a 30% reimbursement for ET costs throughout the duration of the period for which he or she received the 30% ruling.
The reduction in the period of applicability of the 30% ruling does not affect the previously announced capping of the 30% ruling at the level of the WNT standard (EUR 233,000 in 2024).
Supporters of this initiative believe this reduction of the 30% ruling benefits could yield approximately EUR 200 million in taxes annually from 2029 onwards. The amendment provides that these tax revenues would be used to fund lower interest rates on student loans.
Foreign employees who have been granted the 30% ruling are currently allowed (at their option) to declare their income in Box 2 and in Box 3 of the income tax return as if they were not resident in the Netherlands. This is the so-called partial non-resident taxpayer status. The House of Representatives also voted to abolish this provision as of 1 January 2025. Again, there will be a transitional arrangement so that employees who, under the 30% ruling, received in December 2023 an untaxed payment of part of their remuneration, may continue to opt for the partial non-resident taxpayer status until 31 December 2026.
Peter Bos
Robin Schalekamp
Saskia Reijmers
BDO in Netherlands