3 November 2023
Dutch House of Representatives votes in favour of two amendments to reduce the benefits of the Dutch expat tax regime (30% ruling)
Introduction
By means of this Newsflash, we want to provide you with an update on the 30% ruling. On 27 October 2023, the Dutch House of Representatives Tweede Kamer) voted in favour of two amendments to the 30% ruling, effective 1 January 2024 and 1 January 2025. In this update, you will find further background on the amendments, as well as the expected impact thereof.
Please note: The Dutch Senate Eerste Kamer) has yet to vote on (a.o.) the amendments of the 30% ruling. This vote is scheduled for 19 December. If the Dutch Senate votes in favour, the proposed changes will become effective as of 1 January 2024 and 1 January 2025.
Amendment 1 Adjustment of maximum tax-free allowance
Impact of the amendment:30% ruling to become a 30/20/10% ruling
Proposed implementation date: 1 January 2024 (subject to transitional law)
The amendment of the 30% ruling comes down to a further limitation of the benefit of the 30% ruling. While currently the maximum tax free percentage of the Dutch taxable wage that can be provided tax free is 30% (up to the ‘cap’ that will apply as of 2024 for the first cases, reference is made to our earlier update), this will be lowered during the duration of the 30% ruling. The first 20 months, the tax free percentage will remain 30%. For the second 20 months, this will be maximally 20%. In the last 20 months, the maximum tax free percentage will be 10%. Consequently, the maximum duration of the 30% ruling will remain five years.
Transitional law
In the amendment, transitional law is included for individuals for whom the 30% ruling is applied in the last wage tax period of 2023 (usually December 2023 . For these individuals, the maximum tax free percentage remains 30% of the Dutch taxable wage during the period the 30% ruling has been granted by the Dutch tax authorities.
Good to note in this regard is that the so-called ‘salary cap’ of the 30% ruling will still start to apply for certain employees as of 1 January 2024. For those employees, the maximum basis for the 30% ruling will be capped at an income level of EUR 233,000 for 2024, reference is made to our earlier update). This applies in particular for employees who started working in the Netherlands in 2023, as they do not qualify for the – separate – transitional rules in relation to the salary cap. The transitional rules for the salary cap only apply in case the 30% ruling was applied in the last wage tax period of 2022 (usually December 2022 .
Amendment 2 Abolishment partial non-resident taxpayer regime
Impact of the amendment: No exemption from Box 2 and Box 3 taxation for 30% ruling holders
Proposed implementation date: 1 January 2025 (subject to transitional law)
Impact of the amendment
In addition to the amendment above, another amendment was passed by the House of Representatives. This amendment concerns the abolishment of the so-called partial non-resident taxpayer regime, under which holders of the 30% ruling are effectively exempt from Box 2 and Box
3 taxation (limited exceptions apply). The proposed implementation date of this amendment is 1 January 2025. The abolishment 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) but instead become taxable in the Netherlands over their worldwide income (if they can be regarded as a Dutch tax resident).
Transitional law
In the amendment, transitional law is included for individuals for whom the 30% ruling is applied in the last wage tax period of 2023 (usually December 2023 . For these individuals, the abolishment of the partial non-resident taxpayer regime will apply as of 1 January 2027, instead of 1 January 2025.
Point of attention in relation to transitional law (amendment 1 and 2)
Entitlement to transitional law
While there is no written guidance from the authorities at this stage, there is a risk that the authorities will require that the 30% ruling is applied in the first run of the December 2023 payroll (to be eligible for the transitional rules). In other words, that a retroactive correction of the December 2023 payroll would not suffice if this is processed after 31/12/2023 (e.g. if the 30% ruling is applied retroactively for 2023 through a so-called 13th run in 2024 .
Summary of transitional law for the 30% ruling
We note that, as a result of the aforementioned amendments, it is likely that a complex set of transitional rules will apply for employers and employees. A brief overview:
Transitional law: If the 30% ruling was applied in the last wage tax period of 2022, then the cap applies as of 1 January 2026 (instead of 1 January 2024 .
Transitional law: If the 30% ruling is applied in the last wage tax period of 2023, then the 30/20/10% ruling is not applicable during the duration of the 30% ruling. The salary cap on the 30% ruling (see point above) will be applicable (including its own transitional rules).
Transitional law: If the 30% ruling is applied in the last wage tax period of 2023, then the partial non-resident taxpayer regime will no longer be available as of 1 January 2027 (instead of 1 January 2025 .
For all the aforementioned transitional provisions, it is likely that an employee will lose the transitional rights if they do not continuously meet the conditions of an incoming employee (“ingekomenwerknemer”). For instance, in the case of a change in employer, it will be essential that the end date of the initial employment and the start date of the new employment are aligned in order for the employee to remain entitled to the transitional law for the 30% ruling.
What happens next?
For now, we have to wait for the Dutch Senate (EersteKamer) to vote on the Tax Plan 2024, including the aforementioned changes of the 30% ruling. If the Dutch Senate votes in favour of the Tax Plan 2024, the proposed changes will become effective as of 1 January 2024 for amendment 1 and 1 January 2025 for amendment 2 (as indicated above; transitional law can apply for both amendments). The vote in the Senate is scheduled to take place on 19 December. It is expected that the proposed changes will be enacted.
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
Further information on Vialto Partners can be found here: www.vialtopartners.com