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Reduced Time for 30% Tax Ruling in the Netherlands

The 30% ruling will be shortened from eight to five years with effect from the 1st of January 2019. This is proposed by the current Dutch government and written in the national tax plan for 2019. With this, the expat arrangement is drawn in line with that of neighbouring countries and it applies to new knowledge immigrants but also to existing cases.

Background

The cabinet got an evaluation done in 2017 carried out by the Dialogic research bureau which shows that only 20% of employees use the scheme for more than 5 years. In most cases this group appears to remain in the Netherlands for a long time and not temporarily, for which the arrangement was meant for in the first place, so the regulation for more than 5 years no longer has any added value.

What do these cabinet plans mean for employees?

For new expats, the new term for the scheme is directly set at 5 years. For the expats who already work in the Netherlands and are already using this scheme at the moment, the period will be adjusted to 5 years as of January 1st 2019. This means that there is no transitional phase and current knowledge migrants can immediately be confronted with the financial consequences in January.

What do these government plans mean for employers?

Employers and employees to whom this new legislative proposal applies were informed about this in June 2018. Nevertheless, we advise employers to inform the employees concerned again, and to clearly map the remaining term. This way misunderstandings can be prevented.

The Dutch 30% regulation in short

The 30% ruling (the free reimbursement of extraterritorial costs) was created for employees who temporarily reside outside the country of origin for their work. Literally, it means that employers are allowed to pay 30% of the gross wages in addition to the wage. With this allowance, expats can pay extra costs such as moving to the Netherlands and the costs of integration.

Nevertheless, not every expat can make use of this allowance. The scheme was specifically created to attract foreign expertise to the Netherlands. To qualify for this, the employer must apply for a decision from the tax authorities and can demonstrate why this employee has been attracted. One reason for this may be specific expertise that is scarce in the Netherlands. Factors with which the expertise is determined include the level of education, relevant experience and the remuneration level of the employee.

There are also a number of cases in which Dutch citizens who are sent abroad are entitled to the 30% ruling. These are mainly posted workers in education or science who work n developing countries, the former Eastern Bloc countries or military personnel.

Support

Do you have questions about the cabinet plans or do you want to apply the 30% regulation? Please contact TCP Solutions via 020 6757 162 or send a message via our contact page. We are happy to help.

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