Prinsjesdag 2024 – Budget Day has brought some new exciting changes to the 30%-ruling. We will briefly explain the details about this ruling, before going over what the future has to hold.
The 30% ruling allows employers in the Netherlands to pay qualifying employees up to 30% of their salary tax-free for a period of five years. This tax benefit is designed to attract foreign talent to the country. To qualify, an employee must be recruited from abroad and meet specific salary requirements (EUR 46K annually in 2024). Expats who studied or did internships in the Netherlands before starting their careers are often not seen as ‘recruited from abroad’ and are therefore left out of the 30% ruling. The thinking behind this seems to be that people already living in the Netherlands don’t need a tax incentive to contribute to the economy.
The purpose of the 30% ruling is to make the Netherlands an attractive destination for skilled foreign workers by offering a tax incentive. However, the 30% ruling isn’t just an incentive – it’s also meant to cover the higher costs of living as an expat.
As of January 1, 2024, this ruling has been scaled back significantly. While the previous version allowed employees to receive 30% of their income tax-free for five years, the new version reduces this benefit to 20 months at 30%, followed by 20 months at 20%, and a final 20 months at 10%.
This reduction in benefits has sparked concern. A report submitted to the Dutch Parliament argued that the changes could have a negative impact on the Netherlands’ future ability to attract foreign talent. As a result, there are now proposals to reverse some of these cuts.
Looking ahead: Changes in 2025-2027
Taxpayers benefiting from the 30% ruling currently have the option to be treated as foreign taxpayers for Box 2 (income from substantial interest) and Box 3 (income from savings and investments) during the validity period of the ruling. This allows them to generally avoid paying Dutch income tax on foreign assets. However, the option for partial foreign tax liability will be abolished as of January 1, 2025. This can have major consequences for wealthy individuals who have (f.e.) some investments in property in their country (of origin).
In addition to the above, as of January 1, 2027, the new maximum tax-free allowance under the 30% ruling will be set at 27%. For 2025 and 2026, all incoming workers will still be eligible for the full 30% tax-free benefit. Additionally, the salary requirement for the ruling will be increased by several thousand euros.
Importantly, employees who began using the 30% ruling before 2024 will continue to benefit from the 30% allowance until the end of their designated period, even with the new changes coming into effect.
Clearly, these changes reflect the ongoing debate around how best to attract and retain top talent in the Netherlands, while also balancing fiscal concerns. Therefore, keep an eye on future developments as this ruling continues to evolve.
Interested in applying for the 30% ruling? DTS has assisted multiple clients with getting their 30%-ruling. Don’t throw the towel in the ring if your employer or advisor thinks it’s not possible. While you can’t apply for it retroactively, you can still request it for the remaining duration of the 5-year period moving forward. Contact us via [email protected] so we can discuss your chances!
