More austere application of the Dutch 30% ruling 

These are the consequences, and this is how transitional law works 

As of 2024, the application of the Dutch 30% ruling (30% regeling) has changed significantly. This has considerable (financial) consequences for expats and employers benefiting from this Dutch tax benefit. Moreover, these changes, such as the introduction of a salary cap and the gradual phasing out of the untaxed allowance, present companies that work extensively with highly skilled expats with administrative and recruitment challenges. Read more about all relevant developments below.  

Salary cap 

With the introduction of a salary cap, as of 2024, the maximum amount over which the 30% ruling can be applied will be determined. This means that expats will no longer be entitled to the full tax benefit after a certain period of income (or the benefit of the untaxed compensation should be distributed throughout the year to prevent fluctuations in the employee’s net salary). Employers should be aware of this cap and adjust their remuneration policies accordingly to comply with the new regulations. The salary cap as of January 1, 2024, is set at €233,000. 

Reduction percentage of untaxed compensation 

Another important change is the gradual phasing out of the tax benefit over time. After 20 months, the percentage of income not subject to tax is reduced to 20%, followed by another 20 months in which it is only 10%. This incremental reduction in the benefit requires careful planning by employers to minimize financial consequences. Want to discuss the implications of the phase-out for your international workforce and payroll? Contact us here. 

Abolition of partial tax liability by 2025 

Because of the changes to the 30% ruling, the partial tax liability for expats will also be abolished as of 2025. Consequently, they will become fully taxable in the Netherlands for their assets. 

Application of transitional law 

Based on the changes, it is not an exaggeration to describe the adjustment of the 30% ruling as a clear austerity measure. Fortunately, Dutch transitional law (overgangsrecht) offers some relief for existing cases. Below is a summary of the most significant aspects of the transitional law: 

• Salary cap: This provision applies only to employees who were already benefiting from the 30% ruling in 2022, starting from January 1, 2026. 
• Reduction percentage of untaxed compensation: The reduction does not affect employees who already were already benefiting from the 30% ruling in 2023. 
• Abolition of partial tax liability: This change does not impact employees who already qualified for the 30% ruling in 2023 until January 1, 2027. 

Thus, to apply the favorable transitional law, it is crucial to determine the month in which the 30% ruling takes effect. Approval for the 30% ruling is typically granted only after an employee has commenced work in the Netherlands, with a retroactive period of four months. 

The Dutch Tax Authorities (Belastingdienst) confirmed last week that the transitional law applies due to this retroactive effect if the payroll records are adjusted with correction notices (correctieberichten). This is applicable, for instance, if an employee commenced employment in the Netherlands in December 2023, the application for the 30% ruling was submitted in February 2024, and approval was not received until April 2024. Therefore, it is imperative for employers to retroactively process the 30% ruling in the payroll system wherever possible. Need advice on applying the favorable transitional law? Reach out to your designated Crowe Peak advisor or complete this form for a consultation without obligation.