The 30%-ruling is a tax advantage in the Netherlands designed to attract highly skilled workers from abroad by allowing employers to offer a portion of their salary tax-free.

This ruling helps compensate for the additional costs associated with relocating to and living in the Netherlands. It is a practical ruling that allows employers to provide a fixed reimbursement for these costs in stead of tracking and reimbursing the actual costs.

However, recent and upcoming changes to this ruling are set to impact both employers and employees significantly.

This article is written by Brian Jamesr ([email protected]). Brian part of RSM Netherlands Belastingadviseurs, with a focus on Global Employee Services.

Recap and update of the changes

Recap for 2024

As of January 1, 2024, the Dutch government implemented several changes to the 30%-ruling:

Salary Cap

The 30%-ruling can now only be applied to a maximum amount of employment income. This cap is aligned with the maximum income for government employees, known as the "WNT norm," which is €246,000 in 2025 and is subject to annual indexation.

For those benefitting from the ruling by the end of 2022, transitional measures apply through December 31, 2025. This means that as of January 1, 2026 these employees will also be subject to the salary cap.

Annual Election Requirement
Employers must now make an annual election to either apply the 30%-ruling or reimburse actual extraterritorial expenses tax-free.

This change adds a layer of administrative responsibility for employers, requiring them to assess the most beneficial option for their employees each year.

Changes for 2025

Abolition of partial non-resident status
As of January 1, 2025, the Dutch government also abolished the option to choose partial non-residency status. This means that expatriates who use the 30%-ruling can no longer opt to be treated as partial non-resident taxpayers for Box 2 (income from substantial interest) and Box 3 (income from savings and investments) income.

The implications of the change is that expatriates living in the Netherlands will now be subject to full taxation on their worldwide income in the Netherlands. This change will particularly affect expatriates with significant (foreign) investments or substantial interests in non-Dutch companies.

For US citizens and Green-Card holders, the change means that they are likely to face increased taxation on worldwide employment income as well. In case of an assignment to the Netherlands with a net salary agreement (i.e. tax equalization), this may also mean a significant cost increase for the employer. This change thus necessitates careful tax planning to avoid excessive tax burdens.

For those who already had the 30%-ruling in 2023, transitional measures apply. Under the transitional measures, the choice for the partial non-resident status can be through tax year 2026. As of January 1, 2027, the choice for partial non-resident status will end for this category.

Upcoming Changes

Looking ahead, more significant changes are set to take effect on January 1, 2027:

Reduction in Tax-Free Allowance

The most notable change is the reduction of the tax-free allowance from 30% to 27%. This reduction means that employers can only offer up to 27% of an employee's salary tax-free, down from the previous 30%.

This change aims to balance the tax benefits provided to expatriates with the broader fiscal policies of the Netherlands.

Increased Income Standards 

Alongside the reduction in the tax-free percentage, the income standards required to qualify for the 30%-ruling will be increased. The general income standard will rise to €50,436, while the standard for employees under 30 with a master’s degree will increase to €38,388.

These adjustments are intended to ensure that the ruling continues to target highly skilled and well-compensated professionals.

Transitional Arrangements 

Employees who started using the 30%-ruling before January 1, 2024, can continue to use the maximum of 30% for the remainder of the run-time of the ruling.

For employees who started using the 30%-ruling after January 1, 2024, there will be a transitional period. During 2024, 2025, and 2026, these employees can still benefit from the 30% tax-free allowance. However, from 2027 onwards, the allowance will be reduced to 27%.

Implications for Employers and Employees
These changes to the 30%-ruling have several implications for both employers and employees in the areas of:

  • Financial planning
  • Administrative burdens
  • Employee attraction and retention
  • Cost of Living Adjustments

Forward Thinking

The Dutch 30%-ruling has long been a valuable tool for attracting highly skilled workers to the Netherlands. However, the recent and upcoming changes reflect the government's efforts to balance the benefits provided to expatriates with broader tax policies.

Employers and employees alike must stay informed and adapt to these changes to ensure continued compliance and competitiveness in the global market. RSM can support in reviewing your current expatriate population in the Netherlands and advising on the impact of the current and upcoming changes regarding the 30%-ruling.

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