The Netherlands: Recent Developments Regarding the 30% Ruling
The Dutch Ministry of Finance has introduced further amendments to the “30% Ruling” in the Netherlands which aim to restrict the use of this personal income tax reduction. You may recall that new restrictions went into effect January 1, 2012.
The current regulations allow an employer to exempt from income tax up to 30% of the employee's annual salary for the first 10 years of their stay in the Netherlands. It applies to specialized foreign employees who are brought to the Netherlands because their skills are scarce in the Dutch marketplace. Its goal is to compensate employees for the specific expatriate costs (termed “extraterritorial costs”) associated with assignments in the Netherlands.
A similar rule compensates Dutch employees who are assigned to work in designated developing countries and to Dutch nationals returning to the Netherlands after a substantial period of living abroad.
Currently the subject of legal debate is the rule impacting employees whose secondment to the Netherlands took effect on or after January 1, 2012, and who were living within a 150 kilometer radius of the Dutch border during more than 16 of the 24 months prior to the start of their Dutch employment or assignment. They are no longer eligible for the 30% ruling, though that is currently under appeal.
Under the amendments, the 30% ruling may also be applied to trailing payments, if they are actually paid in the month following the month in which the employment or assignment in the Netherlands ended.
Please contact Advisory at email@example.com with questions.