The 30% ruling has been a long-standing subject of discussion in the Netherlands. We previously wrote about the 30% ruling and the changes taking effect as of 2023. Recently, the Dutch House of Representatives (Tweede Kamer) passed two additional amendments to the 30% ruling; the first amendment concerns a reduction of the 30% ruling whilst the second one pertains to the abolishment of partial foreign tax liability (partiële belastingplicht).
The new Dutch “tax plan”, that contains the said amendments is currently under consideration from the Senate (Eerste Kamer). The Senate is expected to decide on this topic in December. Despite the increased political debate surrounding the 30% ruling, we believe it is highly probable that these changes will be implemented in Dutch law. Therefore, we aim to inform you in advance about the potential consequences.
New system for the 30% Ruling
As elaborated on above, it is likely that the Dutch “30% ruling” will undergo a significant revision. Should the amendments proposed indeed be accepted by the Dutch Senate, employees that are eligible for the 30% ruling will not be allowed anymore to receive a tax-free allowance of 30% for (at most) 5 years. Instead, they will receive a 30% allowance for the first 20 months, 20% for the following 20 months, and 10% for the last 20 months. This does not apply to employees already utilizing the 30% ruling in December 2023. It only does when these employees change employers without promptly commencing with a new employer. In that event, they will forfeit the transitional arrangement and, the new tiered system will also apply to them if they reapply for the 30% ruling in the future. In that event, they will forfeit the transitional arrangement and, the new tiered system will also apply to them if they reapply for the 30% ruling in the future.
Abolishment of partial foreign tax liability
Another benefit associated with the 30% ruling is the partial foreign tax liability. Under the (expected) new 30% ruling, the option to opt for partial foreign tax liability (partiële belastingplicht) will be eliminated, starting from 2025. This implies that employees will no longer have the option to be treated as non-residents for tax purposes in Boxes 2 and 3 specifically. Employees enjoying the 30% ruling from 2025 will also be required to pay taxes on their income in Boxes 2 and 3. Furthermore, employees who are already applying the 30% ruling in December 2023 will only face the abolishment of partial foreign tax liability from 2027.
Secure your organization’s financial future with Crowe Peak
The upcoming tax changes can have a significant impact on the organization and its employees, and more specifically for the compensation policies for expatriates. At Crowe Peak, we provide you with hands-on guidance so that you can navigate this transitional period with confidence. We support you in proactively addressing the changes, minimizing risks and, ensuring compliance with the new regulations for both you and your employees. Questions? Reach out to one of our specialists, we are happy to help.
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