30% ruling in the Netherlands to be shortened in 2019

On October 10, 2017, the Dutch government announced its plans for the future. These plans detailed a shortening of the 30% ruling for expats from eight years to five. The government is now planning to enforce this change per January 1, 2019.

30% ruling in the Netherlands

The 30% ruling is a tax advantage for highly skilled migrants working in the Netherlands. The ruling allows employers to offer 30% of an employee’s salary to them tax-free, meaning that the employee only pays tax over 70% of their gross Dutch salary.

The tax break that highly skilled migrants in the Netherlands receive is meant as a reimbursement for the costs incurred when relocating to the Netherlands, such as travel costs, costs for visas and housing costs, to name a few. The 30% ruling is coordinated by the Dutch tax office (Belastingdienst).

This tax advantage was put in place to attract specialists from other countries who have particular expertise which is either not available in the Netherlands or is scarce.

Changes to the 30% ruling

According to a 2017 evaluation of the 30% ruling by research bureau Dialogic, 80 percent of employees receiving the 30% tax advantage do not make use of it for more than five years. The majority of the 20 percent who did take advantage of the 30% ruling for eight years took up long-term residency in the Netherlands.

The Dutch government announced plans to shorten the 30% ruling from eight years to five in its “Confidence in the Future” document. The shortening of the term of the 30% ruling will come into effect on January 1, 2019.

This change will apply to both newcomers applying for the ruling and those already receiving the tax advantage. The government plans on including the changes to the 30% ruling in the 2019 tax plans that will be disclosed on Prinsjesdag.