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Published on: 29 november 2023
Type of publication Insight

A restriction to the 30%-ruling for expats was recently announced. Although this measure has yet to be definitively approved by the Dutch Senate in December, it may have far-reaching consequences for current and future employees with a 30%-ruling as well as for their employers. In this news article we will discuss:

  • The current rules regarding the 30%-ruling

  • The proposed changes to the legislation

  • The expected transitional law

  • What consequences may be expected

  • What action you should consider in preparation to the changes

Update 20 December 2023: The Dutch Senate has now also approved the 2024 Tax Plan. However, it has been requested that the evaluation of the 30%-ruling be expedited. Possible alternatives should be included in the 2025 Tax Plan (Budget Day 2024).

The current 30%-ruling

The 30%-ruling is a beneficial tax scheme for employees hired from abroad with a specific expertise that is scarce in the Dutch labour market. A number of conditions apply in order to be able to obtain a 30%-ruling. Although it goes beyond the scope of this article to discuss all the conditions in detail, they include a minimum wage norm and limits on how near to the Dutch border the employee may have lived in the two years prior to the commencement of employment.

The 30%-ruling yields several tax benefits of which we will discuss the two most important ones. First of all, the employer may pay out up to 30% of the fiscal wages tax-free, as long as the minimum (taxable) wage requirement is still met. This is intended to cover so-called extraterritorial expenses, such as increased living expenses and dual housing costs. Alternatively, it is possible to reimburse the employee for the actual extraterritorial expenses. However, given the administrative obligations involved, many employers opt for the 30% option.

The second benefit is the fact that the employee may opt for the partial non-resident taxpayer status. Shortly put, this means the employee is only subject to Dutch personal income tax (‘PIT’) on their Dutch sources of income. More specifically, income from substantial shareholdings (Box 2-income) is only taxed if the source is a company resident in the Netherlands and income from savings & investments (Box 3-income) is in principle only taxed with regard to Dutch real estate. This means that income from foreign substantial shareholdings, foreign and domestic bank accounts, foreign and domestic income from investments and foreign real estate are not included in the Dutch taxable base.

Proposed changes: non-resident taxpayer status revoked and flat-rate option reduced

In 2019 the maximum duration of the 30%-ruling was shortened from eight to five years following public scrutiny of the effectiveness of the ruling. During the parliamentary debate on the 2024 Tax Plan, new amendments were approved by the Dutch House of Representatives. If it is also approved by the Dutch Senate, the benefits of the 30%-ruling will be reduced even further, in two ways.

First of all, the 30% tax-free remuneration will only apply for the first 20 months of the ruling. This percentage is lowered to 20% for the second 20 months, and further lowered to 10% for the final 20 months. Although it will remain possible to reimburse the actual extraterritorial expenses instead, those who apply the 30% exemption may face a higher overall tax burden (in the case of a gross wage agreement) or significantly higher employer’s costs (in the case of a net wage agreement) compared to the current 30%-ruling. This change is expected to enter into force as of 1 January 2024, with transitional law applicable as discussed below.

The second change concerns the possibility to opt for treatment as a partial non-resident taxpayer. This option will no longer be available as of 1 January 2025. Employees with a 30%-ruling will therefore become subject to the same PIT rules in Box 2 and Box 3 as other Dutch tax residents: their worldwide income may be subject to taxation. Although tax treaties may offer prevention of double taxation in specific cases, this change may well lead to a significant increase in the expat’s Dutch personal income tax burden as of 2025.

Transitional law for pre-exisiting cases

Limited transitional law has been proposed. Shortly put, any employee to whom the 30%-ruling was applied in the final wage period of 2023, will remain subject to the current rules with regard to the flat-rate tax-free remuneration and will not face a reduction of the tax-free rate. This will remain (a maximum of) 30%.

Regarding the partial non-resident taxpayer status, employees who were entitled to the 30%-ruling in the last wage period of 2023 may opt for this status until 31 December 2026. After that, they no longer have this option and they will be treated as regular Dutch resident taxpayers.

Consequences for employers and employees

Depending on what you have agreed upon regarding the employee’s wages, the burden of the reduction of the 30%-ruling will in principle fall upon the employer (in the case of a net wage agreement) or the employee (in the case of a gross wage agreement). Shortly put, either the net wages will decrease significantly or the gross wages will increase significantly. In both cases, however, it can be expected that the employer’s costs will increase.

The changes regarding the partial non-resident status do not, in principle, affect the employer, as they concern the personal income tax position of the employee. This may be different if a specific tax equalisation arrangement was agreed upon, according to which a higher personal income tax burden may also be for the account of the employer. However, the abolishment of this option may weigh heavily in the employee’s choice to remain in (or come to) the Netherlands.

How can you prepare for these changes?

First of all, if you were considering hiring a new employee and applying the 30%-ruling in early 2024, it may be worth investigating whether it is possible to move this forward to 2023 in order to be able to apply the transitional law. Please note that this is subject to certain conditions and that the employee should actually start working in the Netherlands before the end of 2023. Your Baker Tilly advisor would be happy to discuss the options with you.

Additionally, considering the impact the expected change will have to your employee’s income and tax status, it is important to pro-actively assess whether current individual labour agreements or conditions require adjusting, to avoid discussion and unpleasant surprises once the partial non-resident taxpayer status comes to an end. In any case, it is particularly important to bear these changes in mind when negotiating the remuneration of new hires to whom the new rules will apply.

Legislative proposal still subject to approval

We note again that the proposed legislative changes have yet to be approved by the Dutch Senate. It is possible that the changes may be altered or even stricken altogether. However, given the limited time before their envisaged entry into force, it would be prudent to prepare for the possible consequences as soon as possible. Our Global Mobility experts would be happy to discuss how we can be of service to you in this matter.


The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.