The Netherlands – As of January 1, 2019 the maximum period of the 30% ruling may be reduced from 8 to 5 years, for both new and existing cases.
As part of the Tax Plan for 2019, the Dutch State Secretary of Finance has submitted a bill to reduce the maximum term of the 30% ruling from 8 to 5 years.
If approved by the Dutch Parliament, the new rule regarding the 30% ruling will enter into force as of January 1, 2019. The changes will affect both new and existing cases.
This means that an employee who has obtained the 30% ruling for 8 years and enjoyed the 30%-ruling for 5 years already in 2018, will lose its entitlement in 2019.
In brief, the 30% ruling provides for the following benefits:
- It allows the employer to grant a tax free allowance to the employee, as a compensation for the extra costs due to working in a foreign country.
- The tax resident employee can opt for the status of “partial non-resident taxpayer” and therefore subject to Dutch taxation on limited source of income only.
- US national or holder of a green card, who has opted for the “partial non-resident taxpayer” status, may exclude remuneration relating to non-Dutch work days from the Dutch taxable base.
- A foreign driving license can be exchanged for a Dutch driving license without taking any tests or exams.
- If part of the company’s (assignment) policy, fees for international schools can be reimbursed or paid tax exempt.
Generally, the initial salary is reduced by a maximum of 30 % and paid out to the employee as a tax free allowance for Dutch tax purposes.
Instead of the fixed 30% ruling allowance, there is also the possibility for an employer to reimburse the actual extraterritorial costs tax exempt to certain extent.
As part of the changes and if accepted, this possibility will also be limited to a maximum period of 5 years.