As of 1 January 2024, the 30% ruling for highly-skilled employees recruited from abroad will be scaled back even further if the Upper House of Parliament also adopts the bill.
Currently, employees falling under the 30% ruling do not pay any tax on a maximum of 30% of their salary during a maximum period of five years. The 30% ruling is intended to compensate for any additional expenses foreign employees incur when coming to work in the Netherlands (extraterritorial expenses such as travel and accommodation expenses).
As a result of an adopted amendment to the 2024 Tax Plan, the 30% ruling will be scaled back over the course of five years to a 10% ruling. More specifically, during the first 20 months of the five-year period 30% of the salary can still be paid tax-free. During the next 20 months this percentage will drop to 20% and during the last 20 months the tax-free amount will be 10% of the salary.
Transitional rules will apply to employees already using the 30% ruling in December 2023. The scaling back of the tax-free amount will not affect them. This will therefore apply to both employees already falling under the 30% ruling and to foreign employees whose employment in the Netherlands started before December 31, 2023.
Partial foreign taxpayer status abolished
Currently, employees who live in the Netherlands and who fall under the 30% ruling can make use of the partial foreign taxpayer status. This means that they are treated as non-residents/foreign taxpayers for the purposes of Box 2 (income from a substantial interest) and Box 3 (income from savings and investment), despite the fact that they live in the Netherlands.
Another adopted amendment to the 2024 Tax Plan will also abolish the partial foreign taxpayer status as of January 1, 2025. Employees who were already applying the 30% ruling on December 31, 2023, can still benefit from the partial foreign taxpayer status through to 2026 under the transitional rules.
30% ruling capped
The adopted amendments are a significant further scaling back of the 30% ruling. Last year it had already been announced in the Tax Plan that as of January 1, 2024 the 30% ruling could no longer be applied to salaries exceeding the public sector pay cap (in Dutch referred to as the ‘Balkenendenorm’) (in 2023: EUR 223,000).
Transitional rules also apply to this 30% ruling pay cap. For employees who were already using the 30% ruling in December 2022, the pay cap will not apply as of January 1, 2024 but as of January 1, 2026.
Option for 30% ruling or reimbursement of actual expenses
As of January 1, 2023, employers can each year opt to either apply the 30% ruling or reimburse, on an expense claim basis, the actual extraterritorial expenses incurred by the employee. Due to the various measures scaling back the 30% ruling, we recommend calculating the effects of both options so that a well-considered choice can be made.