Further tightening for the 30% ruling for incoming expatriates

Posted on 10th January, 2011

Estimated reading time 3 minutes

The 30% ruling is a fiscal facility for foreign employees who have specific skills or expertise which are scarce on the Dutch labour market and who come to work in the Netherlands, and who meet certain other specific conditions.  Under the ruling, effectively 30% of the remuneration can be paid free of tax.  It has formally been announced that this 30% ruling is granted too often and therefore, its applicability will be restricted.  New, more stringent conditions will be announced to take effect as from January 1, 2012, including the following.

A minimum qualifying salary

The ‘specific expertise’ will be determined on the basis of the taxable salary.  This standard will be €72,312 (or € 50,619 after the application of the 30% ruling) gross per annum (2011).  Any employee earning less will not qualify.  Any employee earning a sufficiently high salary may qualify for the ruling provided that the scarcity in the Netherlands of employees with such expertise is demonstrated by the employee and employer.

Inclusion of stays in previous 25 years

Periods of stay in the Netherlands preceding the start of the employment will reduce the maximum period of 120 months during which the ruling can be available.  Instead of taking into account only periods which ended in the 10 years preceding the start of the employment, as from January 1, 2012, periods of stay in the Netherlands which ended in the 25 years preceding the start of the employment will be taken into account.  As a result, fewer employees, especially Dutch nationals, will qualify for the tax scheme.

Excluding ‘frontier zone’ workers

Cross-border workers from within the so-called frontier zone (announced to be the area encompassed by extending the Dutch border by 150 kilometres) will no longer qualify for the 30% ruling.  In particular, employees resident in Belgium or Luxembourg will be thus excluded from the application of the ruling.  Similarly, a considerable portion of Germany and small portions of Denmark, France and the UK could be struck by this legislative change.

PhD graduates to benefit

However, the 30% ruling will be made available to young PhD candidates too.  PhD candidates coming from abroad (likely also to include outside the 150 kilometre area) within a year after they graduate and who have not reached the age of 30 years may apply for this specific rule.  For this group a lower salary standard will apply than for other employees, i.e. € 38,007 gross per annum (or €26,605 after the application of the 30% ruling).

Existing rulings

According to the State Secretary of Finance, the granted rulings will remain unaffected.  However, after five years since the granting of the 30% ruling have passed a review may be carried out by the Dutch tax authorities to see if the employee still qualifies.  If this review will be carried out after January 1, 2012, the Dutch tax authorities will review on the new rules as stated before with respect to the salary standard and the 150 kilometres frontier zone.  If the eligible employee does not meet these criteria, the 30% ruling will not longer be applicable.

For further information or to discuss any of the issues raised, please contact Peter Bos on +31 20 578 56 23 or Marieke de Vries on +31 20 578 51 76.