The 30% ruling is a specific tax regime for foreign employees that meet certain criteria and who are temporarily assigned to, or hired from abroad by an employer in the Netherlands. When meeting certain requirements, 30% of the employee’s salary can be paid out as a tax-free allowance to cover extraterritorial costs. In addition, the employee may, at his/her request, benefit from a tax treatment as a non-resident taxpayer regarding income from a substantial interest and income from savings and investments.
In 2017 the effectiveness of the 30% ruling was evaluated and the results were published in a report. Although the 30% ruling was found to be both effective and efficient, several suggestions were included in the report to make the ruling more effective.
Mid-2018, the government announced that it would adopt the recommendation to shorten the period for which the 30% ruling is granted from eight years to five years as of 1 January 2019. It is important to note that initially this change would also apply to existing 30% rulings. Which meant that 30% rulings that were in place for longer than five years on 1 January 2019 would immediately end per that date. The aforementioned led to an ongoing debate and many expats felt mistreated. In the end this has resulted in the following transitional law:
Schematically this looks like this:
Due to the shortened duration of the ruling, the period during which the employee may opt to be treated as a partial non-resident tax payer will also be shortened from eight to five years. The employer is responsible to ensure that the ruling is correctly applied in payroll. Therefore, we recommend that employers verify internally the applicable 30% rulings and the correct end date of the rulings based on the transitional law applicable and instruct payroll in this respect.
With this newsletter we give an overview of recent or expected changes in the area of Global Mobility in different countries.
If you have any questions about WTS Global or our global services, please get in touch.
We will respond to you as soon as possible.