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Memo Changes in the 30%-ruling per 1 January 2012 We herewith inform you regarding the proposed changes in the Dutch 30%-ruling. Details of the changes, which are planned to be effective from 2012, are summarized below.

INTRODUCTION Employees hired from abroad can –under certain conditions – benefit from “the 30%-ruling regime” by which 30% of their employment income can be paid tax free to compensate them for specific expatriate costs (referred to as "extraterritorial costs").

CURRENT CONDITIONS The current conditions for application of the ruling are: – The taxpayer is hired abroad by an employer resident in the Netherlands: the employer must be an employer which is obliged to withhold wage tax; – the employee must have specific expertise which is sparsely available in the Dutch domestic labor market. Specific expertise is determined by a combination of the following three conditions: (i) the employee's level of education; (ii) the net level of salary with regard to the employment in the Netherlands corresponding to that in the expatriate's country of origin; and (iii) the employee's relevant working experience in respect of the specific employment. If experience is required for an employment, it has, however, been clarified that this condition is deemed to have been satisfied if the expatriate has work experience of at least 2.5 years in a comparable employment. If the condition (iii) is not met, it may still be possible to qualify for the 30% ruling if the conditions (i) and (ii) are met.

DURATION The 30% ruling is granted for a period of 120 months (10 years), starting from the date of employment in the Netherlands. A reduction to this period applies if an employment or stay in the Netherlands has terminated within a period of 15 years before the start of his new employment and the employee was appointed or residing in the Netherlands 10 years before he was hired.



The condition that the employee has specific expertise, will be deemed to be met if the employee earns a minimum salary of EUR 35.000 (excluding the tax free allowance of the 30%-ruling). A reduced salary threshold of EUR 26,605 will apply to employees with a masters degree up to the age of 30 who have been recruited from abroad. Academic scientists are exempt from a salary threshold. The maximum duration of the 30%-ruling will be reduced from 10 years to 8 years. Rulings issued for employments with a starting date before January 1, 2012 will not be affected. The period which is taken into account for a reduction of the total duration of a 30%ruling will be increased from 10 to 25 years for people previously living and working in





the Netherlands. This will only apply to new cases. Employees living (for two-thirds of a 24 month period before the start of the activities in the Netherlands) within 150 km from the Dutch border are no longer entitled to the ruling. For doctoral students, the period of their doctoral research will not be taken into account, as long as they resided outside the 150 kilometer boundary before starting their doctoral research on the condition that their employment in the Netherlands starts directly after they have completed their doctoral research. The condition that the employee should have specific skills that are scarce on the Dutch labor market will still apply, but will only be assessed in exceptional cases or groups of employees. For instance, professional football players have been specifically mentioned with this respect. The conditions for the application of the 30%-ruling will have to be met during the entire period of application of the 30%-ruling. As soon as the conditions are no longer met, the 30%-ruling will end. For rulings that have already been granted, transitional rules will apply. Transitional rules include that the current terms and conditions of the 30%-ruling will still apply to situations that have started more than 5 years before January 1, 2012. For rulings that have been granted after January 1, 2007, the salary threshold must be met as of the 61th month of application. Moreover, these employees must also meet the 150 kilometer rule at the moment their employment started.

WHAT DOES THIS MEAN FOR YOUR EMPLOYEES WHO ALREADY OBTAIN THE 30%-RULING? After 1 January 2012, the employer of an employee who has applied the 30%-ruling for more than five years (60 months), should examine whether the employee qualifies for the 30%ruling according to the new rules. The new reduction period of 25 years and the maximum application period of 8 ears will only apply to new cases. However, please note if the employee does not meet the salary criteria and/ or the employee was (is) living within 150 km from the Dutch border, the employee is no longer entitled to the 30%-ruling. Please note furthermore that employees who already applied the 30%-ruling for more than five years on 1 January 2012 do not have to be examined and will retain rights for the remainder of the 30%-ruling. If the criteria for the 30%-ruling are not met, it is possible to reimburse the actual extra-territorial expenses under certain conditions. If wanted we could inform you about the extra-territorial expenses. We trust to have informed you sufficiently. Should you have any questions, please do not hesitate to contact your contact person with BDO.

Changes in the 30% tax ruling per 1 January 2012