In December 2023, the Dutch Senate amended a tax provision that allows eligible expatriate employees to receive a tax-free reimbursement of extraterritorial costs by tapering the benefit over a five-year period.

Quick Hits

  • In December 2023, the Dutch Senate approved amendments to the Netherlands' 30 percent ruling, a tax provision that allows eligible employees to receive tax-free reimbursement of extraterritorial costs.
  • The recently passed amendments will create a tapering of the 30 percent ruling benefit, so that the benefit is 30 percent in the first twenty months, 20 percent in the second twenty months, and 10 percent in the final twenty months of applicability.
  • A transitional law also passed with the amendments will allow those employees who received the 30 percent ruling benefit in 2023 to continue to receive the full benefit of the ruling for the applicable five-year period.

How Does the 30 Percent Ruling Work?

Under the Netherlands' 30 percent ruling, eligible highly skilled foreign employees can receive 30 percent of their agreed total compensation tax-free to the extent that 30 percent of their salaries is provided as compensation for the expenses they incur by working outside their home countries (e.g., housing allowances and child education allowances).

The 30 percent ruling applies only to the extent that an employee's remaining salary does not fall below the minimum required applicable taxable salary as referred to in Article 10eb of the 1965 Wage Tax Implementation Decree (currently €41,954). This is the salary required to qualify for the 30 percent ruling in the first place. As a result, if reducing the salary by 30 percent would place the salary below the minimum threshold, it will instead only be reduced by an amount so that the minimum threshold is maintained.

The 30 percent ruling was originally available to expats for eight years; however, the period was reduced to five years in 2019. In December 2023, further amendments were made to reduce the benefit even more.

Who Qualifies for the 30 Percent Ruling?

Not all highly skilled foreign employees qualify for the 30 percent ruling. In order to be eligible, an employee must:

  • be transferred or recruited from abroad;
  • work for an employer registered with the Dutch tax office and paying Dutch payroll tax;
  • have agreed with the employer, in writing, that the ruling is applicable (this is usually done via a 30 percent Ruling Amendment to the Employment Agreement);
  • not reside within 150 kilometres from the Dutch border for the last eighteen out of twenty-four months at the time of hiring;
  • have a salary that meets the minimum requirements (currently €41,954); and
  • have expertise that is scarcely available in the Netherlands.

What Is Changing About the 30 Percent Ruling?

Under the new amendments recently approved by the Dutch Senate, and effective January 1, 2024, the current tax-free allowance will change to a 30/20/10 percent ruling. This means that the 30 percent ruling is revised so that the 30 percent tax-free allowance is applicable for only the first twenty months; the allowance will then drop to 20 percent for the second twenty months and 10 percent for the final twenty months.

What Are the Transitional Rules?

A transitional law has also been put in place for those who have had the 30 percent ruling applied before January 1, 2024. The transitional law allows those employees who were already benefitting from the 30 percent ruling to continue to do so for the entire sixty-month period, as long as they started working in the Netherlands in 2023 and the 30 percent rule was already lawfully applied for their wages no later than the final salary period of 2023.

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