30% ruling and 150 km rule: no systematic overcompensation according to Dutch Supreme Court

Written by Nicolas de Limbourg 9 March 2016


According to the Dutch Supreme Court, the 150 kilometre criterion under the 30% ruling for employees hired from abroad (expats) is EU proof. The limits of the ruling (the ‘30% of the taxable base’ and the ‘150 kilometre distance from the Dutch border’) were set in such a way that the 30% ruling does not systematically give rise to a net overcompensation in respect of the extraterritorial expenses actually incurred.

The 150 kilometre criterion applies from 1 January 2012 as a condition for the 30% ruling. The Dutch Supreme Court requested a preliminary ruling from the European Court of Justice (ECJ) in August 2013 for the tenability of this criterion. Both the Supreme Court and the ECJ held acceptable that the Dutch legislation applying a simplifying measure (distance from the border) that is approximate in nature does not automatically entail a restriction of the free movement of workers, or a form of indirect discrimination.

The ECJ further held that the referring Court had to investigate if the limits were set in such a way that the 30%-wage exemption (30% ruling) systematically gives rise to a net overcompensation in respect of the extraterritorial expenses actually incurred. The Dutch Supreme Court held that, although certain groups of expats are overcompensated (i.e. in the case of very high salary levels), the 30% ruling does not result in systematic general overcompensation and, therefore, is compatible with the free movement of workers within the EU.