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26.07.2019

Netherlands: 30% ruling shortened to five years as of 1 January 2019

Overview of the resulted transitional law

Key Facts
  • Individuals who have had the 30% ruling for five years or longer in 2019 or 2020: the transitional law applies for two years. The ruling will end ultimately on 31 December 2020.
  • Individuals who have not had the 30% ruling for five years in 2019 or 2020: the transitional law applies up to 31 December 2020. The end date of their ruling will in principle be reduced by three years.
  • The period during which the employee may opt to be treated as a partial non-resident tax payer will also be shortened from eight to five years.
  • Employers are recommended to verify internally the applicable 30% rulings and the correct end date of the rulings based on the transitional law applicable and instruct payroll in this respect

The 30% ruling is a specific tax regime for foreign employees that meet certain criteria and who are temporarily assigned to, or hired from abroad by an employer in the Netherlands. When meeting certain requirements, 30% of the employee’s salary can be paid out as a tax-free allowance to cover extraterritorial costs. In addition, the employee may, at his/her request, benefit from a tax treatment as a non-resident taxpayer regarding income from a substantial interest and income from savings and investments.

In 2017 the effectiveness of the 30% ruling was evaluated and the results were published in a report. Although the 30% ruling was found to be both effective and efficient, several suggestions were included in the report to make the ruling more effective.

Mid-2018, the government announced that it would adopt the recommendation to shorten the period for which the 30% ruling is granted from eight years to five years as of 1 January 2019. It is important to note that initially this change would also apply to existing 30% rulings. Which meant that 30% rulings that were in place for longer than five years on 1 January 2019 would immediately end per that date. The aforementioned led to an ongoing debate and many expats felt mistreated. In the end this has resulted in the following transitional law:

  • Individuals who have had the 30% ruling for five years or longer in 2019 or 2020: the transitional law applies for two years. The ruling will end ultimately on 31 December 2020.
  • Individuals who have not had the 30% ruling for five years in 2019 or 2020: the transitional law applies up to 31 December 2020. The end date of their ruling will in principle be reduced by three years.

Schematically this looks like this:

  • The employee has a ruling with an end date in 2019 or 2020: The ruling will end of the end date mentioned on the dicision issued by the Dutch tax authorites.
  • The employee has a ruling with an end date in 2021, 2022 or 2013: The ruling will end on 31 December 2020. 
  • The employee has a ruling with an end date in 2024 or following years: The duration of the ruling will be reduced by three years. 

Due to the shortened duration of the ruling, the period during which the employee may opt to be treated as a partial non-resident tax payer will also be shortened from eight to five years. The employer is responsible to ensure that the ruling is correctly applied in payroll. Therefore, we recommend that employers verify internally the applicable 30% rulings and the correct end date of the rulings based on the transitional law applicable and instruct payroll in this respect. 


Contact

Yvonne Bakker
Email: yb@atlas.tax

Article published in Global Mobility Newsletter#1/2019
Brief overview of recent or expected changes in the area of Global Mobility in 9 selected countries
View publication
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