30% Ruling Changes 2024
Important amendments to the 30% ruling
On 27 October 2023, the Dutch parliament unexpectedly made and approved two changes to the 30% ruling.
As from 2024, new 30% rulings will not give a full 30% advantage for the full 5 years anymore
Under the current 30% ruling, a tax-free reimbursement of expenses can be granted that is at maximum 30% of the gross salary of an employee. This benefit applies for 5 years, so for 60 months. Under the new regime, the tax-free reimbursement will be 30% in the first 20 months but will decrease to 20% for the next 20 months and to 10% for the last 20 months. A transitional rule applies to employees who already benefit from the 30% ruling in December 2023 and they will not be affected. However, if those employees change employer, they will no longer benefit from the transitional rule and the new regime will also apply to them as from that moment. The introduction of this results in further complexity of the payroll administration of the employee for whom the 30% ruling is applied, but more importantly, it also makes the Netherlands less attractive for foreign talent. We at Dutchtaxadvice are against the changes for that reason.
Expats will be liable to pay tax in box 2 and box 3, also for existing 30% rulings
Expats benefitting from the 30% regime can opt to be treated as a non-resident taxpayer for Box 2 and Box 3, meaning that they do not pay tax on foreign substantial shareholdings, and also not on other savings and investments, let alone Dutch real estate. This regime will be abolished as from 2025. As a result, employees with the 30% ruling will soon become liable to more personal income taxes. Employees who already benefit from the 30% ruling before 1 January 2024 will only be confronted with its abolition after tax year 2026. Not only will this increase the tax burden of expats, it will also make their tax returns a lot more complicated. This is because they usually have savings and investments that is not just in Dutch bank, savings and investment accounts like Dutch people have, but they frequently have foreign accounts and real estate. The Dutch tax return is not friendly to having to report this.
For existing holders of the 30% ruling, this will probably lead to new appeals / court cases as people have counted on now having to pay this tax for the full five years of the 30% ruling. We will have to wait and see what this will bring.
Note that the Tax Bill has been adopted by the Parliament but is still subject to approval by the Senate. However, it is expected that this will be approved.
Possibility to reimburse actual extraterritorial expenses
If more beneficial, the employer may also choose to reimburse the extraterritorial expenses actually incurred, instead of applying the 30% rule. The employer must be able to prove these costs exist. The costs must also be recorded per employee in the payroll administration. Reimbursing the actual extraterritorial costs can be a better alternative for future expatriates who have higher extraterritorial costs than 30% of the gross salary. Especially after 20 months when only 20% or 10% of the gross salary can be reimbursed tax-free under the 30% ruling. The choice to apply the actual reimbursement or percentage of the 30% ruling must be made for a calendar year.
We are of course able to help you and/or your employer with everything that is about the 30% ruling. We as you may know apply very fast and efficiently for 30% rulings, but we can also help to apply this in the payroll and to advise you on the ins and outs of how the 30% ruling works out in your personal income tax situation. And of course, we can also work out for individuals what it would mean financially when they also become taxable for box 2 (substantial shareholdings) and box 3 (other savings and investments).