Being an expat in the Netherlands, one must be well aware of the tax benefits given to them and among those is the Dutch 30% ruling. Here is in-depth data on what is Dutch 30% ruling?
What is Dutch 30% ruling?
Dutch 30% ruling is a is a tax advantage for skilled migrants moving to the Netherlands for a specific employment role. This benefit is provided because when you are coming to work in the Netherlands from another country you may experience higher cost of living than you are used to, for instance, because living expense in the Netherlands might be higher than in your country. So, your employer may compensate you for 30% of the gross salary subject to Dutch payroll tax for your extraterritorial costs untaxed.
Extraterritorial costs: Extraterritorial costs are costs that an employee would incur if he/she works in the Netherlands. Regular business expenses are not to be considered Extraterritorial costs and can be reimbursed in accordance with Dutch wage tax rules. The employer can decide to reimburse the real Extraterritorial costs. This can be done if the costs are higher than the 30% allowance or when the 30% ruling is not granted.
From a tax perspective, the salary agreed upon between the employee and employer may be reduced by 30%. In return, the employee should receive a 30% tax reduction. This is the most common way it is applied as it does not influence the salary burden for the employer. In effect, it is equivalent to having a maximum tax rate of approximately 36.2%. Such great benefits for expats, no Doubt why the Netherlands attracts so many people!!!
What’s been the situation in 2019 and before?
The Dutch 30% ruling in the Netherlands is a way to entice skilled expat workers into the country. However, it has been the focus of political debate in recent years. Many Dutch parties regularly propose to cut the allowance. Plans by the government to reduce the allowance period came into effect on 1 January 2019.
Considering this, an individual filed a case in 2014 ahead The Court of Appeal in Amsterdam . The individual studied in the Netherlands for an uninterrupted period of 1.5 years and subsequently stayed in the Netherlands to find a job is not sufficient enough to have sustainable ties with the Netherlands. An important argument the Court brought in is that the residency permits were only valid for a limited period of time and that it was unsure whether the individual could legally stay in the Netherlands after the residence permits expired.
The Court of Appeal in Amsterdam eventually decided that she is not considered a resident taxpayer of the Netherlands at the time she conducted the employment agreement and that she is therefore eligible for the 30%-ruling. This decision of the Court of Appeal (Gerechtshof) is from 29 October 2019. Then it granted a transition period until January 2021 after protests.
So, What happened to the Dutch 30 % ruling in January 2021 protests?
The last change came in on 1 January 2019 by the Dutch government. Following protests, the government provided a transition period for people who had previously been granted 30% rulings of more than five years.
The following happened to the Dutch 30 % ruling in January 2021 protests:
- New rulings granted will be a maximum of 5 years
- There is no change to a ruling with an end date in 2020
- People previously granted 8 year rulings due to end in 2021, 2022 or 2023 will lose these years. Their rulings will end on 1 January 2021.
- For 30% ruling holders who arrived before 1 January 2012 and have a 10 year ruling, their exemption ends (early) on 1 January 2021.
Checkout the article on the Benefits of the Dutch 30% ruling in the Netherlands to learn more about the Dutch 30% ruling.