30% ruling? Expat ruling? What really changes and how does it affect your employees?

This summary, intended for information purposes only, includes a summary of the most
important changes and a brief explanation of the ruling in the last paragraph.

1. The tax benefit of the 30% ruling (expat ruling ) will be reduced.

The maximum tax-free allowance of 30% will be reduced to a maximum of 27%
as of 2027. In addition, the employee’s minimum required taxable salary will be
increased to qualify for the ruling. There will also be a cap on the maximum salary
to which the ruling shall apply.

Exactly what will change depends on the date the ruling was granted to your employees:
The 30% ruling took effect before January 1, 2024:

You may continue to pay up to 30% of the employee’s salary tax exempt for the
maximum period of 5 years.

The 30% ruling (expat ruling) took e􀆯ect after January 1, 2024:

In 2024, 2025, and 2026, you may pay your employees up to maximum 30% of
their salary tax-free.

From 2027 onwards, you may reimburse your employees up to a maximum of
27% tax-free.

2. No more partial non-resident tax status

From 2025 onwards, employees who have been granted the ruling cannot apply
for the partial non-resident tax. Therefore, all these employees will be subject to
Dutch taxation also for box 2 and box 3 income.

Only employees to whom the ruling applied in December 2023 can use the option
of partial non-resident tax status until 2026, provided that the ruling still applies.

As of 1 January 2027, these employees will also be taxed on their box 2 and box 3
income.

What is the expatriate ruling (formerly the 30% ruling)?

Foreign employees who come to the Netherlands incur costs related to their relocation
and often higher cost of living than in their home country. These are the so-called
extraterritorial costs.

With the ruling, an employer can compensate these foreign employees for a period of up
to 5 years. The ruling is issued by the Dutch tax authorities and is granted upon request if
certain conditions are met.

Furthermore, tax resident employees who has obtained the ruling could opt for the
partial non-resident tax status. This allowed them to be treated as real non-residents for
box 2 (substantial interest) and box 3 (savings/investments) income, generally meaning
no taxation for box 2 and box 3 income.