[Fact file] The 30% ruling cut: What you need to know!
There has been a lot of confusion surrounding the cut from eight years to five for the 30% ruling. Will there be a transitional period or won’t there? Will it apply to those already receiving the benefit? And what are the consequences for you as an individual?
To clear a few things up for you, this fact file will take you from the announcement of the cuts to the present day, with the developments in between. But first, a quick reminder of what the 30% ruling is and does.
What is the 30% ruling?
The 30% ruling is a tax break for highly skilled migrants in the Netherlands. It enables those who meet the requirements to receive 30% of their wages tax-free. So, basically, only 70% of their gross Dutch salary is taxed.
One of the most frequently asked questions right now is what the maximum duration of the 30% ruling is and will be. It was 10 years back before 2012 and eight years after that, but now the Dutch government is planning on shortening this period to five years as of 2019.
Cuts to 30% ruling announced
On October 10, 2017, the new government coalition presented their plans for the future. These plans detailed a cut to the 30% ruling, resulting in a maximum duration of five years instead of the current eight.
In April of 2018, the government announced plans to shorten the 30% ruling per January 1, 2019. These plans followed a 2017 evaluation carried out by research bureau Dialogic. According to the evaluation, 80 percent of employees receiving the benefit did not utilise it for longer than five years, and the majority of the 20 percent who did, took up long-term residency in the Netherlands.
With the plans to shorten the 30% ruling per 2019, the government also announced that this measure would apply to all highly skilled migrants receiving the benefit, regardless of whether they had been receiving it for years or had just started applying for it. The government intended to include the changes to the 30% ruling in the 2019 tax plans that would be announced on Prinsjesdag.
Expats in uproar
As can be imagined, this news made expats in the Netherlands panic. What did it mean for them? Especially those who had already been receiving the benefit for five years; would it just end come January 2019?
In response to the government’s announcement, a petition called “A deal is a deal” was set up. Some 40.737 people have currently signed it* and the petition is still open for those who want to sign it.
ICAP, media partners of IamExpat, also set up a survey to gather information about the effects the shortening of the 30% ruling would have on expats. The results of the survey were presented to MPs on the parliamentary finance committee before their meeting on May 29.
*At the time of writing.
Letters to and from the Dutch government
Several letters have gone back and forth between the government and other parties since the announcement of the plans to shorten the 30% ruling.
Political comments and questions
On May 31, 2018, the committee for Finance presented the State Secretary for Finance with questions and comments from political parties in the Netherlands regarding the 30% ruling cut plans previously announced in April.
Many of their questions and comments focussed on what effect the reduction of the 30% ruling would have on those who would therefore no longer receive the benefit per 2019 and whether or not a transitional period would be introduced.
Businesses in the Netherlands urge reconsideration
On June 7, 2018, a number of large businesses sent an urgent letter to State Secretary Snel, asking him to reconsider the cut to the 30% ruling for existing beneficiaries and organise a transitional period.
The businesses in the letter also remark that such a move regarding the 30% ruling tarnishes the predictability and trustworthiness of the Dutch government. This letter was signed by, amongst others, Booking.com, Takeaway.com, Adyen, Coolblue, Bol.com and the Dutch Startup Association.
Employers and employees in the Netherlands informed
On the same day, June 7, employers received a letter from the Dutch tax office (Belastingdienst) containing information about the shortening of the 30% ruling and the effects it will have.
On June 14, employees also received a letter, which reported that the reduced 30% ruling would have consequences for the individual’s taxes, in particular with regards to partial foreign tax liability, which can only be chosen if one is still eligible for the 30% ruling benefit.
Dutch Finance State Secretary replies
On July 6, 2018, State Secretary Snel replied to the questions and comments previously posed by political parties on May 31. In this letter, he states that, according to estimates from the Dutch tax office, around 11.000 employees will be affected by the cut per January 1, 2019, and another 6.500 will reach the end of their five-year benefit period in 2019.
He also remarks that the cut will apply to both existing and new beneficiaries with no transitional period. The lack of transitional period is explicitly specified in the cabinet’s announcement on April 20, 2018, to cut the 30% ruling.
2019 Dutch governmental budget presented
Finally, Prinsjesdag is here and the Dutch governmental budget for 2019 is announced. Despite previous mentions that the cuts to the 30% ruling would be included in the plans, no acknowledgement is made of them.
However, the 2019 tax plans do mention the shortening of the ruling and whether or not there will be a transitional period. The shortening of the ruling is still set for January 1, 2019, and will not include a transitional period.
The government does, however, propose a transitional period when it comes to school fees for international schools, as a cut to the 30% ruling also means a cut to the period in which school fees can be provided or reimbursed without being taxed.
This can have a great impact on families with children who attend an international school and stay in the Netherlands for more than five years. The government proposes that school fees for the year 2018 / 2019 still be paid untaxed, provided that the employee in question would have received them had the 30% ruling benefit not been shortened.
Right now, it looks like the case is pretty much cut and dry and the 30% ruling will be shortened with no transitional period, apart from for school fees, come January 1, 2019. There are, however, people still fighting. United Expats of the Netherlands (UENL), who were also responsible for the petition which gained thousands of signatures, are now investigating legal options and looking to commission a legal opinion.