The Dutch 30% ruling is often referred to as a beneficial tax regime, subject to a set of conditions, for employees who are hired abroad (i.e. transferred from abroad or recruited from abroad) to work in The Netherlands. An important condition is that the employee must hot have lived within 150 kilometres of the Dutch border during a specific period prior to the start of the employment in The Netherlands. In general, if the 30% ruling is fully applicable, the gross (taxable) salary of the employee is reduced by 30%.
Recently, the Dutch government has announced that it will reduce the maximum duration of the 30% ruling, notably from 8 to 5 years. This reduced application will be applicable as of January 2019 for both new and existing employment situations (without transitional measures). For example, if an employee is working already for 6 years in The Netherlands under application of the 30% ruling, then it is anticipated that the regime will no longer be applicable as of January 2019.
The maximum period of 5 years will also apply to the partial non-resident taxpayer status and to the possibility of reimbursing actual extraterritorial expenses tax-free. The other conditions for the application of the 30% ruling will not change.
Taking into account this anticipated change in Dutch tax law, companies may want to review the impact for their expat population as soon as possible. Some expats may already be affected in roughly half a year’s time. For all future applications for the 30% ruling, it is important to indicate that, based on this recent announcement, the maximum term of the 30% ruling will be 5 years.