Shortening of the 30% ruling for expatriate employees from eight years to five
Expatriate employees who satisfy certain conditions need not pay tax on up to 30% of their salaries. The government intends to reduce the duration of this 30% ruling to just five years.
Allowance for additional costs
The 30% ruling applies to employees who are recruited abroad and temporarily posted to the Netherlands. If they satisfy the conditions, they do not need to pay tax on up to 30% of their salaries. This government measure helps them cover additional costs resulting from temporarily working in the Netherlands, such as travel expenses, additional housing costs and day-to-day extraterritorial expenses.
The government wants to reduce the duration of the 30% ruling from eight to five years with effect from 1 January 2019.
Reasons for the shorter duration
The Ministry of Finance had an external consultancy agency evaluate the 30% ruling in 2017. The evaluation concluded:
- about 80% of the employees used the regulation for five years or less. Many of the remaining 20% were not posted temporarily to the Netherlands but stayed for longer periods of time;
- comparable rulings in other countries apply for five years;
- the additional costs covered by the 30% ruling decline over the years;
- a reduction in the duration to five years would reduce the cost of the ruling yet still achieve its goals nearly as well.
Transitional arrangement for international schools
A transitional arrangement applies to tuition fees for international schools. It involves an allowance for employees who may be seriously affected financially by the fact that employers can no longer pay or reimburse the tuition fees for international schools tax-free. Under the arrangement, tuition fees for international schools for the 2018/2019 school year may be paid or reimbursed tax-free even after the duration of the 30% facility has been shortened, provided these fees are paid or reimbursed within the original time limit.
Change included in the 2019 Tax Plan
The government intends to include the change to the 30% ruling in the 2019 Tax Plan, which will be published on Budget Day 2018. The Dutch parliament still needs to approve the change.