Latest Developments on the 30% Ruling
Last October the government of the Netherlands released a document announcing its future plans. The paper was finalized after a negotiation of more than 200 days. The document promises changes in various aspects of society. They include additional police funding and improvements of counterterrorism and cyber security. The government also envisages reforms in the labour market concerning sick leave, procedures for dismissal, rules for paternity leave and minimum wages. It plans to adopt a new system for pensions and amend the rules for child benefits. The paper also includes schemes on climate change, immigration, education and housing.
The 30 percent reimbursement ruling
The plans of the government specifically related to foreign employees concern changes to the thirty percent rule in the framework of envisaged tax reforms.
The 30 percent reimbursement ruling gives tax advantages to highly skilled foreign employees in the country, allowing them to receive 30 percent of their wages free of tax. Therefore such employees pay tax on seventy percent of their income. The rule is a form of reimbursement of the expenses migrants make for their relocation to the country, including housing, travel and visas. This tax advantage is a method to attract highly qualified international workers and fill existing expertise gaps in Holland. Currently foreign employees can claim the advantage for 8 years, even though it has been estimated that only about 80 percent of them actually benefit from it.
Last October the government made an announcement that soon the maximum period of the 30 percent ruling will be reduced from 8 to 5 years. The change will apply to newcomers and employees that are already using the advantage.
Read more on the 30 percent reimbursement ruling in our FAQ.
A petition signed by 30 000 people
Until now approximately 30 000 have supported a petition asking the government of the Netherlands to keep the old rule for employees who have already moved to the country and currently benefit from the advantage.
People have created Facebook groups to highlight and discuss the issue and have launched a campaign to raise money to fight in court the decision of the government. They say that they recognize the government’s authority to change the policy for future foreign employees as appropriate, but the amendments should not apply to current expats who have already moved to the Netherlands with the assumption that they will be entitled to 8 – 10 years with reduced taxes.
The decision to limit the 30 percent ruling term for existing claimants without a period of transition has raised much concern among expats. Employers of international workers are also worried about the repercussions of the proposed change.
Many lawyers specializing in taxation have been contacted by people with concerns about the ruling’s implications.
The 60 000 foreign workers in the Netherlands meeting the strict requirements on income will face significant financial consequences. If, for example, an expat is earning 60 000 Euros a year, then he/she will have to pay approximately 8000 Euros more in taxes. This considerable drop in personal income will inevitably make the country less attractive for foreign professionals. Many other countries worldwide welcome skilled employees, so people willing to work abroad will likely choose other locations. To counter this trend, Dutch employers will have to offer much more attractive packages for relocation and better salaries.
International workers in the Netherlands have already voiced their concerns by lodging complaints and donating money to the campaign for challenging the decision. A person who has arrived in Holland last year commented on the page that he has recently bought a flat, taking a thirty-year mortgage. He feels cheated by the government that decided to change the rules retroactively and considers this practice dishonest.
You can find more information on the campaign at: https://www.gofundme.com/expatfund or hashtag #aDEALisaDEAL
Intercompany Solutions offers comprehensive financial advisory services to expats who live and work abroad. Regardless of your situation, we will help you see your finances clearly and prepare yourself for the future.
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