Reversal of the 2023 amendments to the 30% ruling confirmed

Tax advisors are people like everyone else. And like everyone else, we like a good news scoop; the plans for the 30%-ruling that were meant to be announced during on Prince Day on September 17, 2024 have already been leaked.

As predicted in our previous article, the Dutch government and coalition parties have decided to reverse the 2023 amendments to the 30%-ruling that were originally set to reduce the tax-free allowance for expatriates in a phased manner. This decision was driven by concerns over the potential negative impact on the Netherlands' ability to attract and retain international talent.

The original plan: phased reduction

As previously discussed, the 30%-ruling allows employers to provide expatriates with a tax-free allowance of up to 30% of their salary for a maximum of five years, intended to cover the additional costs of living abroad. The 2023 amendment, proposed a phased reduction of this allowance:

• First 20 months: Up to 30% tax-free allowance.

• Next 20 months: Up to 20% tax-free allowance.

• Final 20 months: Up to 10% tax-free allowance.

This phased approach was met with significant concern from various stakeholders, particularly employers, who argued that it would weaken the competitiveness of Dutch organizations in attracting foreign talent and damage the country’s business climate.

Evaluation and reconsideration

In response to these concerns, the government requested an evaluation of the 30%-ruling and consider less harmful alternatives. The evaluation, published in June 2024, confirmed the effectiveness of the 30%-ruling in attracting highly skilled migrants who contribute positively to the Dutch economy. It also found that even without the partial non-residency status, the 30%-ruling remains an attractive benefit for wealthy expatriates.

The findings highlighted that reducing the benefits of the 30%-ruling could have adverse effects on the Netherlands’ appeal as a destination for international talent, prompting the government to reconsider the proposed changes.

The new decision: a minor adjustment

In light of the evaluation, and as part of the budget agreements set to be officially announced on Prince’s Day, September 17, 2024, the government has decided to reverse the phased reduction plan. Instead of the previously proposed 30/20/10 rule, the tax-free allowance for expatriates will remain intact for the full five-year period but will be slightly reduced from 30% to 27%.

This adjustment, while minor, reflects a compromise between maintaining the Netherlands’ competitive edge in the global talent market and addressing fiscal considerations. The reduction of just 3% is expected to have a minimal impact on expatriates while still contributing to the government’s budgetary goals.

Looking ahead

The upcoming announcement on Prince’s Day will provide further details on how this decision will be implemented and if there will be transitional law. Stay tuned for more updates as we continue to monitor and analyze the implications of these policy changes.