Explained: The NEW 30% ruling 

If you were recruited from outside the Netherlands, you are likely familiar with the concept of the ‘30% ruling.’ In 2024, the Dutch government introduced several key changes to the 30% ruling. To help businesses and expats understand what these changes mean for them, we are going to use this article to explain the NEW 30% ruling from this year. 

• What is the 30% ruling? 

• What is new with the 30% ruling? 

• Who is eligible in 2024? 

• Do you have the old 30% ruling? 

What is the 30% ruling? 

The 30% ruling is a tax advantage for people coming to live and work in the Netherlands. The ruling allows the employers of these people to pay up to 30% of their total salary tax-free.  

The purpose of this ruling is to assist employees in covering the expenses associated with relocating from abroad to the Netherlands. Additionally, it aims to provide further motivation for highly skilled workers to move to the Netherlands, especially considering that they may not be able to earn as much due to the country’s tax rates, or due to the lack of support the expat would otherwise receive in their home country. All of these costs are known as “extraterritorial costs.”  

What is new with the 30% ruling? 

The 30% ruling can now only be applied to the employee’s salary for a maximum five years. For those people who applied and were granted the 30% ruling in 2023 or earlier, they can have 30% of their salary paid tax-free for up to five years. For example, if somebody applied the 30% facility to their salary starting in 2020, then 2025 would be the last year in which the 30% ruling could be applied. The old 30% ruling had no end-date and could be applied to an employees’ salary indefinitely. 

For new applicants of the ruling (employees who apply in 2024 or 2025), the full 30% advantage is NOT applied for the full five years. Instead, the 30% is reduced every 20 months. The reduction works as follows: 

• First 20 months, 30% of the employee’s salary is paid tax-free 
• 20 months after that, 20% of the employee’s salary is paid tax-free 
• The following 20 months, 10% of the employee’s salary is paid tax-free 

Further, the 30% ruling may now only be applied over a maximum amount, which is determined yearly.

Other new additions of the 30% ruling allow employers a choice as to how to pay the employee with this tax advantage. There are two options: either (1) apply the tax-free payment over a percentage of the employee’s salary (as described above) or (2) reimburse the actual extraterritorial costs tax-free. 

Lastly, the new 30% ruling will do-away with the ‘partial foreign tax liability’ (partiële buitenlandse belastingplicht) in 2025.  

Who is eligible in 2024? 

There have not been any changes in the eligibility requirements for the 30% ruling. According to the Belastingdienst requirements for the 30% ruling, the person who will receive the tax advantage must fit the following criteria: 

• They have ‘specific expertise’ which is unique or scarce in the Netherlands (see ‘when do I have specific expertise?) 
• They were recruited from abroad (or transferred within a multinational) to work in the Netherlands. They were living more than 150 kilometers away from the Dutch border for at least 16 of the 24 months before moving to the Netherlands. 
• They earn a wage compliant with the income standard (toetsloon), which is dependent on their age and level of education. This changes every year.  

Do you have the old 30% ruling? 

There are several changes in the 30% ruling that will be introduced in 2024 and 2025. These changes are mostly applicable for new applicants of the 30% ruling, in other words, people who apply for the tax advantage in 2024 and later. However, these changes do have implications for people who already have the 30% ruling tax advantage.  

If you, or your employees, are taking advantage of the 30% ruling, this is what you need to know: 

• There is a five-year limit to apply the 30% ruling. For example, if the 30% ruling recipient first applied (and received) the 30% ruling in 2020, then 2025 will be the last year.  
• If you have already used the 30% ruling before December 2022, the maximum remuneration limitation will not apply on 1 January 2024, but 1 January 2026. 
• There are transition laws for current recipients of the 30% ruling which are applicable depending on which year they started. The official advice is for companies and individuals to consult with a taxation expert for specific instruction about their situation. 

Octagon Professionals as an Employer of Record 

Understanding the intricacies of the 30% ruling in the Netherlands can significantly impact both employers and employees alike. As you navigate through the complexities of international employment, partnering with a trusted Employer of Record like Octagon Professionals can streamline the process and ensure compliance with Dutch law.  

Let us handle the administrative burdens while you focus on growing your global workforce and achieving your business goals. Reach out to us today to learn more about how we can support your international expansion journey.