The Dutch government intends to reduce the term of validity of the 30%-ruling from eight to five years as from 1 January 2019. The proposal applies to both new and existing situations. It was accepted by the Cabinet on a proposal from the State Secretary of Finance. Acceptance of the proposal by the Dutch Parliament means that all 30%-rulings that have been ongoing for more than five years on 1 January 2019 will end abruptly.
30%-ruling / actual extraterritorial expenses
The 30%-ruling provides employers with the opportunity to grant a fixed tax-free allowance to employees for the additional expenses related to their stay outside their country of origin, the extraterritorial expenses, of up to 30% of the salary. According to the government's proposal, the 30%-ruling will be granted for only five years at most. Instead of the 30%-ruling, the employer may also reimburse the actual extraterritorial expenses tax-free. The period for reimbursing the actual extraterritorial expenses will also be reduced from eight to five years. The conditions of the 30%-ruling do not change otherwise.
Partial non-resident taxpayer status
Employees who have obtained the 30%-ruling may opt – every year again - for a limited tax liability in the Netherlands, which is referred to as the partial non-resident taxpayer status. A maximum term of five years will also apply to this optional scheme.
The government intends to include the changes in the Tax Budget 2019, which will be announced on the opening day of the Dutch Parliament (Prinsjesdag) 2018. Click here for the letter to Parliament.
What can you already do as an employer at this time?
We advise you to establish for which employees the proposed changes will have consequences as from 1 January 2019 enabling you to inform your employees in time about the new conditions in case the proposed changes will be implemented effectively as from 1 January next.
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