On March 4, 2016 the Supreme Court ruled that the 150-kilometer criterion in the 30% ruling is not contrary to EU law. This definitely means that 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 in the Netherlands, are eligible for the 30% ruling.

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.

Legal proceedings on the criterion being contrary to EU law

The taxpayers had taken the position that the 150-kilometer criterion was contrary to EU law; there was a prohibited restriction of the free movement of workers within the EU.

This question was put to the CJEU, which ruled in February 2015 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 foreign employees.

The Supreme Court judgment

The Supreme Court ruled that the application of the 30% ruling does not involve a clear systematic overcompensation of the extraterritorial costs actually incurred by foreign employees. According to the Supreme Court, this percentage is based on factual research and the legislator has tried to keep this percentage in line with the actual extraterritorial costs incurred by foreign employees. Therefore the 150-kilometer criterion is not contrary to EU law and can be maintained.

Practical consequences

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 in the Netherlands are definitely no longer eligible for the 30% ruling. It is therefore essential to check where a foreign employee resided, as due to the 150-kilometer criterion, citizens of Belgium, Luxembourg and the German and French border regions are no longer eligible for the 30% ruling. However, the actual extraterritorial costs incurred may, in that case, be reimbursed untaxed.

Click here to download the memorandum in pdf format