The Netherlands 2019 Tax Plan was approved by the Dutch Senate on 18 December 2018. It includes a reduction in the maximum period of time to which the expatriate rule applies (the “30% ruling”) from eight years to five years. The change is effective 1 January 2019.
What is the 30% ruling?
“Specialist” expatriates (individuals who have specialized skills or knowledge that are not readily available in the Dutch labor market) can get a tax free allowance of up to 30% of total compensation (called the 30% ruling) for a maximum period of time (it had been eight years). Expatriates apply for the 30% ruling with the Dutch tax office, called the Belastingdienst. After 60 months the Dutch tax office may require proof that the specialist test is still being met by the individual. The allowance provides relief for additional costs typically incurred by expatriates living abroad (e.g., housing costs, travel costs, costs for visas).
Maximum period reduced, transition rules
Effective 1 January 2019, the maximum period for the 30% ruling has been reduced to five years from eight years. There are transitional rules for current specialist expatriates until 1 January 2021:
- If the original end date of an employee’s 30% ruling is in 2019 or 2020, there is no change and the original end date will continue to apply.
- If the original end date of an employee’s 30% ruling is in 2021, 2022, or 2023, the 30% ruling will end on 1 January 2021. This means the employee has the tax free allowance of up to 30% of total compensation until 31 December 2020.
- If the end date of an employee’s 30% ruling is in 2024 or later, the 30% rule will end three years earlier than had been expected.