Tax

Further cut in 30% ruling

The prospective Dutch Government proposes to reduce the maximum period for the 30% ruling from 8 to 5 years. The change would be effective 2019. No further information on the changes was disclosed at this time.

Under the 30% ruling, employees hired or assigned from abroad whom meet certain requirements can have (up to) 30% of their salary paid out in the form of a tax-free allowance. The indicated measure is thus targeted at the period in which employees would be eligible to make use of this ruling.

The timing of this proposed change is questionable, especially since many companies are considering changing headquarter locations in connection with Brexit. Even if the proposal is not adopted in Dutch Parliament, uncertainties about the investment climate may sway companies to look elsewhere to set up their headquarters.

Evaluation report regarding the expatriate ruling (30% ruling)

Dutch Parliament ordered an evaluation report about the 30% ruling for expatriates. The report was presented on June 13, 2017. The main question was whether the goal of the 30% ruling was reached, namely to attract professionals with special skills and know how that is scarce in the Netherlands. The report concludes that, generally speaking, the ruling is effective but that with some amendments the arrangement could be even more effective.

We studied the suggested adjustments and compared the pros and cons. Our conclusion is that the 30% ruling should remain unchanged. The ruling works well in practice and the proposed adjustments would only add extra layers of complexity whereas the expected benefits would be minimal.

Explanation of the 30% ruling

The 30% ruling allows foreign employees who have know how or skills that are scarce on the Dutch labour market and who earn a (taxable) annual salary of € 37,000 or more, to receive a tax exemption of a maximum of 30% of their salary because of the extra costs that they have to bear due to their relocation and living outside of their country of origin.

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