Changes to the 30% Tax Ruling in Netherlands
The 30 percent ruling is a tax exemption for foreign employees who were hired abroad to work in the Netherlands. If the conditions are met, the employer is allowed to pay the employee 30 percent of his or her salary as a tax-free allowance. This tax-free allowance is considered a compensation for the expenses the employee has by working outside his or her home country, but such expenses do not need to be substantiated. You may have heard of the Netherlands 30 percent tax ruling available to foreign employees who move to the country – but do you know what the benefit actually is, and how it works? A large number of private individual clients are employees. They have been granted the so-called 30% ruling. Under this ruling, employers can pay out a sum of maximum 30% of their normal salary, tax free. In order to obtain this ruling, certain conditions will need to be met (see later), but overall this is a very attractive and popular arrangement for expats. The Netherlands 30% tax ruling is attractive for highly skilled international workers. This ruling entitles employees who are new to the Netherlands to a 30% tax exemption. It is intended to be used as a means of reimbursing the employee for costs incurred through the relocation process. However, neither the employee nor employer is required to provide proof of any costs incurred in order to prove eligibility. The new budget also sees a reduction in the duration of the 30% ruling. The duration of the ruling has been reduced from 8 to 5 years, effective from the 1st of January, 2019. In principle, this reduction applies to all taxpayers, including those who have been initially granted the ruling for up to 8 years. However, grandfathering rules do apply, which result in the following: 1. Rulings that are set to expire in 2019 or 2020 will remain unaffected. 2. Rulings that are set to expire in 2021, 2022, or 2023 will expire on December 31, 2020 3. Rulings that are set expire in or after 2024 will face a reduction in duration of the ruling by 3 years. So If you have planned your future according to the original eight-year duration of the 30% ruling – including investing, buying property, or even having children? You may have to re-evaluate your projects. It would be a good idea to speak to a financial advisor.