On October 9, 2015 Advocate General (AG) Niessen rendered his Opinion on whether the 150-kilometer criterion in the 30% ruling is contrary to EU law. According to the AG, there is no systematic and clear overcompensation and consequently no violation of EU law. This Opinion was rendered after the referral by the Court of Justice of the European Union (CJEU) on February 24, 2015, which we previously reported on.

The 150-kilometer criterion in the 30% ruling

The 30% ruling involves a fixed allowance paid to compensate for the costs of a temporary stay outside the country of origin (extraterritorial expenses). As of January 1, 2012 only employees who resided more than 150 kilometers from the Dutch border during at least two-thirds of the 24 months preceding the commencement of their employment or secondment in the Netherlands are eligible for the 30% ruling.

Proceedings before the CJEU

In February this year the CJEU ruled that the 150-kilometer criterion in the current 30% ruling is not contrary to EU law. This would only be the case if there was a systematic clear overcompensation of the actual extraterritorial expenses incurred by the foreign employee.

AG Niessen’s Opinion

According to the AG, crucial to any assessment of whether there is systematic and clear overcompensation is whether the legislator intended a systematic overcompensation when introducing the 30% ruling; that the practical application results in overcompensation is irrelevant.

The AG infers from the parliamentary debates that the government and parliament regularly paid attention to the tax-free benefit of the 30% ruling. The government ministers indicated that the nature of the subject matter made it particularly difficult to make a precise calculation, and that past experience shows that the ruling on the whole is not too generous. The AG considers that although the fixed amount is set at a rather generous amount, an intention to systematically and clearly overcompensate is not apparent.

The AG then uses three standard situations to calculate the extraterritorial expenses in relation to the income. These examples show that employees residing no more than 150 kilometers from the Dutch border who commute each day are overcompensated, but these employees are not eligible for the 30% ruling. Incoming employees with a top income (EUR 250,000) are also overcompensated. However, the number of employees with a top income is so small (1.9% of the employees with a 30% ruling, on the basis of a 2002 survey) that the AG concludes that this cannot be regarded as systematic and clear overcompensation.

If the AG has interpreted the referral question correctly and his examples are realistic, then as far as he is concerned the 30% ruling does not lead to systematic and clear overcompensation. Consequently, the AG concludes that the appeal before the Supreme Court is unfounded. Employees who resided no more than 150 kilometers from the Dutch border during more than one-third of the 24 months preceding the commencement of their employment or secondment in the Netherlands are then definitely no longer eligible for the 30% ruling. If the Supreme Court follows the AG's opinion, this group of employees will no longer be able to take advantage of the 30% ruling.

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