On Budget day, September 18, 2018, the Dutch government published its tax plan for 2019. As expected, part of the tax measures include proposed legislation to reduce the maximum period of the 30%-ruling from 8 to 5 years.
No transitional measures
In spite of attempts by employers, employees and advisors, the Dutch Government announced that there will not be any transitional measures on the reduction of the period. This means that existing cases will also be impacted by the measure, including those whom were promised the full ten year period by the Government back in 2011.
In a meagre attempt to satisfy some criticism, the Dutch Government did announce a transitional measure with respect to (international) school fees for the school year 2018/2019 in cases where the ruling would end on January 1, 2019.
Increase of costs between 30 and 35 percent
The proposed legislation means a drop in net income of around 20 percent for employees affected by the measure. In addition, these employees will lose the possibility to opt for exemption of certain income items. For companies operating a traditional expatriate policy, an average increase in costs is expected of between 30 percent to 35 percent. In addition, an added administrative burden (and thus cost) is expected for employers, employees, courts and the Dutch Government.
Given the current state of affairs in Europe (e.g. Brexit) and around the globe, the Dutch Government has a unique opportunity to remain attractive for companies and talented workforce. The proposed legislation however, is a further detriment to the Dutch Government's ability to put forward reliable and sustainable policy. And this in an era where reliability and sustainability are key. In this regard, the timing of these measures remains highly questionable. Nevertheless, companies should consider alternative assignment, compensation and tax strategies.