Transitional rules for 30% ruling also apply to adjustment with retroactive effect

Even if the 30% ruling is applied with retroactive effect in the payroll records in 2022 or 2023, employees will still fall under the transitional rules. This was announced by the Dutch tax authorities in its latest position in the series on transitional rules and the application of the 30% ruling. Transitional rules apply to both the scaling back and capping of the 30% ruling and the abolition of the partial foreign taxpayer status.

Do transitional rules apply to an adjustment with retroactive effect?

Whether transitional rules apply depends on whether the 30% ruling was applied in the last payroll period of 2022 or 2023. Based on the recently published 30% Ruling Adjustment Decree, in certain situations a payroll period may be adjusted with retroactive effect by means of an adjustment return. The question was therefore whether, in the event of an adjustment with retroactive effect, the benefits/allowances under the 30% ruling were received in the last payroll period. Yes, is the answer from the Dutch tax authorities. For the purposes of the transitional rules, even after the adjustment the benefits/allowances were received in the relevant period.

When do which transitional rules apply?

The following periods are relevant for the transitional rules:

• As of January 1, 2024 30% ruling capped up to the public service pay cap
  Transitional rules apply, which means that the capping of the 30% ruling as of January 1, 2026 will apply to employees if:
  • the 30% ruling for the employee was applied in the last payroll period of 2022;
  • the employee, after December 31, 2022, has worked continuously without interruption as an insourced employee.
• Scaling back of 30% ruling to a 10% ruling as of January 1, 2024
  Transitional rules apply, whereby the scaling back does not apply to employees if the 30% ruling for those employees was applied in the last payroll period of 2023.
• Partial foreign taxpayer status abolished as of January 1, 2025
  Transitional rules apply, whereby employees may make use of the partial foreign taxpayer status until December 31, 2026 if:
  • the 30% ruling for the employee was applied in the last payroll period of 2023;
  • the employee, after December 31, 2022, has worked continuously without interruption as an insourced employee.

The transitional rules only end if the application of the 30% ruling is interrupted. Changing withholding agents on time (whether or not within a connected group of withholding agents) and the transfer of the business are not considered an interruption. In that case, employees will continue to fall under the transitional rules.

Important!

If the last payroll period of 2022 or 2023 falls in the application period for the 30% ruling and the actual extraterritorial expenses of the employee were reimbursed in that month or the 30% ruling had not yet been applied, this can still be rectified by means of an adjustment return if the conditions of the Decree** are met. The transitional rules will then apply. 

A lot of changes, positions and news reports about the 30% ruling in a short period of time, so we can imagine that you’d like to know more or have questions about this. Feel free to contact our 30% ruling specialists Rachèl van Dijk or Monique van Leeuwen.