Reduction of the 30% ruling benefit in the Netherlands starting from 2024

• You are a salaried employee. You were hired outside the Netherlands by a Dutch company.
• You have specific or highly qualified expertise that is either scarce or in low supply in the Dutch job market, meaning you are considered a skilled migrant.
• Reside more than 150km from the Dutch border for more than 16 out of the 24 months preceding your first working day in the Netherlands.
• Workers from Belgium and Luxembourg, for example, are excluded from the scheme in any case.

• If you want to apply for the scheme from the first working day, make sure that the Dutch tax authorities (Belastingdienst) receive the application to apply for the scheme within four months after the first working day.

• The taxable income of an employee must exceed 46,107 EUR gross per year (in 2023, the figure was 41,954 EUR).

• For an employee under 30 years old with a master’s degree, their taxable income must be higher than 35,048 EUR gross annually (in 2023, it was 31,891 EUR).

• The application will be limited to a maximum salary of 233,000 EUR, determined by the High Incomes Standard Act (WNT standard), also known as the Balkenende standard.

• This standard establishes a maximum salary limit to which certain tax benefits, such as the 30% ruling, can be applied.

• Recently, the Dutch parliament approved significant changes to the 30% ruling regime. It should be noted that currently, an employee can receive a tax-free reimbursement of 30% of their gross salary for 5 years.

• On October 26, 2023, the Dutch House of Representatives recently decreased the 30% ruling in the Tax Plan 2024 in two additional aspects:

Progressive reduction of the 30% ruling:

1. Starting from 2024, the updated regulations will no longer guarantee a total reimbursement of 30% over the 5-year period (60 months). The plan will allow its unchanged application during the first 20 months, enabling the payment of 30% of the gross salary as a tax-free expense reimbursement. During the next 20 months, you will only be able to receive 20% of the gross salary tax-free, and in the last 20 months, only 10% tax-free.

2. From 2025, expatriates will be obliged to pay taxes in boxes 2 and 3, even for those currently benefiting from the 30% ruling.

• • “Box 2” in the Dutch tax declaration focuses on income generated from shareholdings in a company, such as dividends and profits derived from the sale of shares in a company.
  • “Box 3” includes declarations of balances from bank accounts, investments, and real estate inside and outside the Netherlands, excluding the main residence.

• Instead of applying the 30% ruling, an employer has the option to reimburse actual extraterritorial expenses incurred by an employee if this proves more beneficial.
• To make use of this alternative, the employer must be able to demonstrate the actual occurrence of these costs, and furthermore, they must be individually recorded in the payroll administration.
• Opting for the reimbursement of current extraterritorial costs can be an excellent choice for future expatriates whose costs exceed the 30%/20%/10% of their gross salary. The decision to reimburse these actual extraterritorial expenses must be made in the first payroll period of the calendar year and applied for the entire year.

• From the year 2024, more stringent requirements will be implemented for the 30% ruling regime, allowing employers to pay a portion of the salary tax-free under specific circumstances.
• These adjustments aim to simplify the system but, at the same time, establish specific salary limits.
• The changes in the regulation of the 30% ruling in the Netherlands have a substantial impact on expatriates and their employers, influencing both tax responsibilities and payroll management.

• According to calculations, it is expected that the savings resulting from these modifications will increase from 3 million euros in 2025 to a substantial amount of 194 million euros in 2029 and beyond.
• The proposal involves using the freed-up funds to decrease student loan interest.
• As a consequence of these changes to the 30% ruling regime, employees will face higher personal income taxes.
• This situation will not only increase the tax burden on expatriates but will also significantly complicate their tax declarations.