The Dutch government has decided to reduce the maximum duration of the 30% ruling to 5 years.
The 30% ruling is a tax exemption for employees from abroad who have been temporarily posted to the Netherlands. Up to 30% of their salaries can be paid tax-free to help cover the additional costs resulting from temporarily working in the Netherlands, the so-called extraterritorial expenses.
An evaluation report ordered by the Ministry of Finance in 2017 concluded that the best part of these expat employees does not stay for more than 5 years while the remaining part cannot be considered as temporary anymore.
The shortening of the duration of the 30% ruling by 3 years will take effect on 1 January 2019.
What does this mean for those who already have a 30% ruling in place?
The new duration will be applied to both new applications and existing decisions.
That means that the end date on an already granted decision will be shortened by 3 years on January 1st 2019. In certain cases this will result in an immediate termination of the ruling as of 1 January 2019.
We expect this change to affect around 18.000 expat employees over the coming 12 months.
The government deemed no transitional arrangement necessary.
One exception is made for tuition fees for international schools. For those who will be seriously affected financially, tuition fees for international schools for the 2018/2019 school year may be reimbursed tax-free by the employer even after the duration of the 30% ruling has been shortened, provided these fees are paid within the original validity of the ruling.