Employment Tax
Dutch Budget Day 2024 and upcoming tax related changes as of 1 January 2025
Key updates from a Global Mobility perspective
Introduction
By means of this NewsFlash, we want to provide you with the relevant updates in light of the announced legislative proposals on Dutch Budget Day and other changes in legislation set to take effect on 1 January 2025. Below, you will find further details and considerations regarding proposed and upcoming legislation that is relevant from a global mobility tax perspective.
What are the most important (proposed) changes?
Wage tax – 30% ruling to become the 27% ruling as of 2027
The Tax Plan 2025 contains various changes to the Dutch expat tax regime (the 30% ruling). The actual legislative drafts are expected to be published in the week of 14 October. In the meantime, we have summarized the key (announced) changes to the 30% ruling based on the attachments to the Tax Plan.
Tax exempt amount: 30% in 2025 and 2026, 27% as of 2027
The first announced change concerns the partial reversal of the so-called 30/20/10 ruling that applies as of 1 January 2024. Under the 30/20/10 ruling, the maximum tax free allowance under the 30% ruling was capped at 30% for the first 20 months, 20% for the second 20 months and 10% for the last 20 months. Based on the new proposals under the Tax Plan 2025, this will change. For 2025 and 2026, there will be a fixed maximum of 30% for all employees eligible for the 30% ruling. As of 1 January 2027, this percentage will be reduced to 27%. Transitional rules are proposed to apply for individuals who already received a tax free allowance under the 30% ruling prior to 2024. Based on historical changes, we expect that in practice it will be considered relevant if the 30% ruling was applied in the December 2023 payroll.
Salary norm: additional increase as of 2027 (on top of annual indexation)
The second announced change is an additional increase of the minimum salary threshold that an incoming employee should meet in order to be considered eligible for the 30% ruling. This additional increase will be on top of the annual indexation and will take place as of 1 January 2027. It concerns an increase of the regular salary norm of EUR 46,107 to EUR 50,436 and an increase of the lowered salary norm (applicable to employees under 30 years of age with a qualifying Master’s) from 35,048 to EUR 38,338. We note that the increases are based on the 2024 amounts and do therefore not yet include the annual indexations. Also for this change, transitional rules are proposed to apply for individuals who already received a tax free allowance under the 30% ruling prior to 2024.
Cap of the tax-free allowance remains unchanged
The cap of the tax-free allowance that was introduced on 1 January 2024 by limiting the basis of the tax-free allowance to the regulated maximum remuneration for the public sector (EUR 233,000 in 2024 and EUR 246,000 in 2025, indexed annually) remains applicable, including the transitional rules under which this change only comes into force as of 1 January 2026 for individuals for whom the 30% ruling was applied in the last wage tax period of 2022.
Definitive abolishment of the partial non-residency regime as of 2025 (2027 in some cases)
The abolishment of the so-called partial non-resident taxpayer regime will not be reversed, which means that holders of the 30% ruling will no longer (almost completely) be exempt from paying taxes in Box 2 (substantial shareholding) and Box 3 (savings and investments) as of 1 January 2025 (or 1 January 2027 if the 30% ruling was applied in the last wage tax period of 2023). Instead, they become taxable in the Netherlands over their worldwide income (if they can be regarded as a Dutch tax resident).
Overview key dates
The announced changes further increase the complexity of the 30% ruling and the variety of transitional rules. For completeness’ sake, we have therefore included a high level overview of the key dates below:
Income tax – Relevant changes in Box 1 (employment and principal residence)
Preparation for a remote work arrangement in tax treaties with Belgium and Germany
The Netherlands is currently in discussions with neighboring countries Belgium and Germany about potentially including a remote working arrangement in the tax treaty. The goal of such an arrangement would be to agree that up to a certain number of days worked from the country of residence, the employment income in relation to those workdays will be allocated to the country of the employer under the tax treaty (instead of the country of residence).
As part of the Tax Plan 2025, a change in income tax legislation has been announced to anticipate such a remote work arrangement. This change (in the so-called ‘place of employment fiction’ for non-residents) aims to ensure the Netherlands can effectuate the right to tax the income related to workdays abroad. Furthermore, this change also provides a solution for tax issues in specific situations of seafarers for example between the Netherlands and Belgium.
At this stage, the exact status of the discussions regarding a remote work arrangement is not known, and it is unclear when we can expect the introduction of such an arrangement. However, it is anticipated that a remote work arrangement will include a maximum number of remote workdays (as an example, reference is currently made in the Tax Plan to 34 days per year), and will therefore not be a solution for the situation of ‘permanent remote workers’.
Change in Box 1 tax rate
The government has announced a limited reduction of the tax rate for income up to EUR 38,441 (first tax bracket). Furthermore, there will be a limited increase of the threshold for the top tax rate of 49.5%.
Income tax – Change in Box 2 tax rate (substantial interests)
As of 1 January 2024, Box 2 consists of two tax brackets. Initially, this was announced as a tax rate of 24.5% on taxable income from substantial interest up to EUR 67,000 and a tax rate of 31% on the excess. During the parliamentary discussion of the Budget Day plans last year, an amendment was passed to raise the top tax rate to 33% (which is currently applicable). As part of the Tax Plan 2025, it is proposed to reverse this additional increase of the top rate in order to bring the combined tax burden more in line with the effective top tax rate in Box 1. As of 1 January 2025, the top tax rate for Box 2 is therefore proposed to amount to 31% for income exceeding EUR 67,000. The 24.5% rate in the first bracket will remain unchanged.
Income tax – No change in Box 3 tax rate (personal investment income)
In the coalition agreement presented in May this year, a reduction of the Box 3 tax rate was announced. Based on the Tax Plan 2025, this reduction will not take place. This means that the current Box 3 tax rate of 36% remains applicable.
Enforcement of assessment of work relationships per 1 January 2025 (Wet DBA)
The Dutch government wants to work towards a (more) level playing field for employees and self-employed individuals and is therefore looking into fitting (tax) measures in order to qualify the work relationship as employee or self-employed. In the past years, the Dutch tax authorities did not enforce the rules regarding the qualification of the work relationship, pending new legislation. As of 1 January 2025, the Dutch tax authorities will start with enforcement of the legislation currently in place. This means that the Dutch tax authorities is more likely to impose additional wage tax and social security assessments or correction obligations as of 1 January 2025 in case of false self-employment.
What happens next?
We note that the legal status of the changes included in this NewsFlash is currently still draft legislation. As a next step, the proposed legislation will be further discussed in the Dutch House of Representatives (Tweede Kamer) and the Dutch Senate (Eerste Kamer). However, it is likely that these changes will be approved in December 2024 in accordance with the normal legislative process (potentially with amendments from the Dutch House of Representatives).
Specifically for the proposed changes to the 30% ruling, the government has announced that they need further time to work on the legislative details. It is anticipated that these details will be presented in the week of 14 October.
How we can help
As Vialto Partners, we can assist you with the required steps to obtain insight into the impact of the (proposed) legislation on your workforce, how to communicate this to employees and new hires and to take action in anticipation of the upcoming changes, e.g. in relation to the impact from a finance, payroll and reward perspective.
Contact us
Please feel free to reach out to the following Dutch Vialto Partners colleagues to discuss further:
Further information on Vialto Partners can be found here: www.vialto.com
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