Changes 30%-Ruling per 2024 and How to Deal With It as an Employer

In December 2023 the Dutch Senate agreed with an amendment to reduce the benefits of the 30%-ruling. In this article we provide you with an overview of the changes to the 30%-ruling effective as per January 1, 2024.

1. Reduction of percentage: the 30/20/10%-rule
2. Maximum employment income
3. Partial non-residency status
4. Increase 30%-ruling salary criteria
5. Future – 2025
6. How to deal with the changes as an employer

 

1. Reduction of percentage: the 30%/20%/10%-rule

30%-ruling holders with a grant after January 1, 2024
The 30%-ruling has a maximum period of 5 years (60 months). During the first 20 months the tax-free allowance can amount to a maximum of 30% of the taxable employment income in the Netherlands. During the subsequent period of a maximum of 20 months, the tax-free allowance can amount to a maximum of 20% of the taxable employment income in the Netherlands. For the remaining 20 months, the tax-free allowance is a maximum of 10% of the taxable employment income in the Netherlands.

If the 30%-ruling granted for a period less than 5 years, a maximum 30% tax free allowance can still be provided for the first 20 months, followed by a 20% reimbursement for a maximum of 20 months, and the remaining term applies a maximum of 10% compensation. For example: a 30%-ruling grant has a period of 4 years. The application is: 20 months maximum 30% tax free, 20 months maximum 20% tax free, and 8 months maximum 10% tax free.

Overview maximum duration of 30%-ruling
1st 20 months: 30%
2nd 20 months: 20%
3rd 20 months: 10%

30%-ruling holders with a grant before January 1, 2024
A transitional law applies if the 30% ruling was applied to the payroll in December 2023, based on a 30% ruling decision. The transitional law means that the 'old' 30% scheme, which does not involve a reduction, continues to apply in full. If the taxpayer who is subject to the transitional law changes employer, the transitional law will continue to apply - under certain conditions - provided that the employment contract with the new employer has been agreed within 3 months after the end of the previous employment relationship.

 

2. Maximum employment income

30%-ruling holders with a grant after January 1, 2023
The 30% ruling has been capped at the so-called 'Balkenende norm' with effect from 2024. In 2024, the 30% ruling may be applied up to employment income of EUR 233.000. If the employment income is higher, no tax-free allowance can be calculated on the excess.

30%-ruling holders with a grant before January 1, 2023
As this change was agreed before, a transitional law applies if the 30% ruling was applied in the payroll in December 2022 on the basis of a 30%-ruling decision. The Dutch Tax Authorities indicate that the tax-free compensation must also have been received in December 2022. The transitional law means that the salary cap will only apply from 2026 at the latest for 30%-ruling holders with a grant before January 1, 2023.

If the taxpayer who is subject to the transitional law changes employer, the transitional law will continue to apply - under certain conditions - provided that the employment contract with the new employer has been agreed within 3 months after the end of the previous employment relationship.

 

3. (Partial) non-resident status

Current 30%-ruling holders can choose via their Dutch individual income tax return - during the term of the 30%-ruling - to be treated as a non-resident taxpayer for box 2 (income from a substantial interest) and box 3 (income from savings and investments). In principle, they therefore do not pay Dutch income tax on foreign assets.

30%-ruling grants after January 1, 2024
The option for partial non-resident status will be abolished as of January 1, 2025.

30%-ruling grants before January 1, 2024
Transitional law applies if the 30% ruling was applied to the payroll in December 2023, based on a 30% ruling decision. As result current 30%-ruling holders can remain to opt for the partial non-resident status in the years 2025 and 2026. This option will expire from 1 January 2027.

 

4. Increase 30%-ruling salary criteria

To apply the 30% ruling, the employee must have specific expertise that is scarce on the Dutch labor market. The Dutch Tax Authorities assume that employees have this specific expertise if their taxable employment income exceeds a certain limit.

The employment income requirements for the 30%-ruling as of January 1, 2024:

1. An employee's taxable employment income must amount to more than EUR 46.107 on an annual basis (2023: EUR 41.954).
2. The taxable employment of an employee who holds a master's degree and is younger than 30 years old must amount to more than EUR 35,048 on an annual basis (2023: EUR 31,891).

Note: Make sure that your employees comply with the new indexed amounts annually.

 

5. Future

In the amendment the Senate also urged the Dutch government to investigate an alternative for the changes due to the impact on the economy and internationals. This alternative can be integrated into the 2025 Tax Plan. As result the current changes, effective from January 1, 2024, can be fully or partially reversed through a new amendment that takes effect on January 1, 2025. For employees with the 30%-ruling with start date after 1 January 2024, the full 30%-ruling still applies for the first 20 months, so if the ruling is still changed back within that timeframe, the impact of the current change will be limited. Unfortunately, this is not certain and needs to be seen in the future.

 

6. How to deal with the changes as an employer

Set up overview of 30%-periods of employees
We advise to set up an inventory for all your employees with all factors related to the 30%-ruling and the required conditions. For example: the periods of the 30%-ruling, employment income and age of employees (< 30 year with Master degree). This enables you, together with your payroll provider, to be in control of the changes and remain compliant.

Extraterritorial costs
From the overview you can also assess if the actual extraterritorial costs exceed the fixed reimbursement, so that you and your employee can opt for tax-free
reimbursement of the actual costs instead of applying the 30%-ruling (or 20% or 10%). In principle, this choice is made per calendar year.

 

Do you like to know more about the 30%-ruling and how to deal with the changes? Would you like to know more about the above changes and their consequences? If so, please contact Thijs Meijer via e-mail: thijs@ttmtax.nl or phone +31 (0) 20 205 1109. We are happy to assist you.

Disclaimer: The information provided in this article above is based on the current legislation - Dutch Tax Plan 2024 and may be subject to change pending legislative decisions.