Tax Plan 2012 – changes to the 30% ruling accepted by the Dutch House of Parliament (Tweede Kamer) - Mazars - Netherlands

Important changes with regard to the 30% ruling are introduced in the Tax Plan 2012, which has been accepted by the Dutch House of Parliament yesterday. The 30% ruling is a concession for foreign employees being assigned to the Netherlands or who are recruited by a Dutch employer from abroad, who have specific expertise which is scarce on the Dutch labor market. Qualifying employees may receive 30% of their wages as a tax-free allowance to cover additional expenses incurred because of their stay in the Netherlands (extraterritorial expenses).

22/11/2011

The announced changes in respect of the 30% ruling focus on the conditions, which should be met  in order to apply for and benefit from the ruling. These changes are described below: 

Specific expertise test

Under the present 30% ruling the employee should have specific expertise which is scarce on the Dutch labor market.  The employee’s education and work experience are crucial in this respect. As of January 1, 2012, these criteria will be replaced by a salary threshold, of € 35,000, excluding the 30% tax free part.  In practise this means that employees can only benefit from the new 30% ruling if their salary/remuneration will exceed an amount of  € 50,000.

Students

Under the new ruling, foreign students with a masters degree at a Dutch university will be eligible for the 30% ruling  if they are employed by a Dutch employer subsequently and meet a reduced salary threshold of € 26,605, excluding the 30% tax free part . Currently, they cannot benefit from the ruling since they do not meet the condition that the employee has to be recruited from abroad.  Please note that no salary threshold will apply for scientists and researchers employed by educational and (subsidised) research institutions.

Maximum period of validity

The maximum period of validity of 10 years under the current 30% ruling will be reduced to 8 years. Rulings granted prior to December 31, 2011 will not be effected by this new rule.

Extension of reference period

The 30% ruling will, in principle, be granted for a period of 10 years. Periods of earlier employment or stay in the Netherlands, that ended less than 10 years prior to the start of the current Dutch employment will be deducted from total length of the 30% ruling (10 years). As of January 1, 2012, the reference period of 10 years of previous stay will be extended to a period of 25 years. 

This change is crucial for Dutch citizens who have lived and worked outside the Netherlands for more than 10 years. Under the current ruling they are eligible for the 30% ruling, assuming they meet all other conditions as well. Due to the extension of the reference period, in practice Dutch citizens who return to the Netherlands will in the future only be eligible for the 30% ruling if they have lived and worked outside the Netherlands for more than 25 years. 

Cross-border workers

In order to prevent the labor market position of Dutch employees, cross border employees living – for more than 16 months within a time frame of 24 months prior to starting to work in the Netherlands - within a 150 kilometer radius of the Dutch border are no longer eligible for the 30% ruling. By introducing this 150 kilometer test, the number of cross border employees who will be eligible for the 30% ruling may be reduced significantly. This change will not only have an adverse impact on cross border employees from Belgium and Germany, but may have – in addition – an (adverse) effect on employees from the UK, Denmark, Luxemburg and France, as far as they live within this 150 kilometer radius. The radius should be measured as the crow flies.

The term ‘cross border employee’ will be interpreted in a broader sense. In general, a cross border employee for Dutch purposes is considered an employee living in Belgium or Germany, performing employment duties in the Netherlands. In addition to the above mentioned reason for adjusting the 30% ruling, it could be questioned if this category of employees will be faced with additional costs when working in the Netherlands. The changes, however, will also have an impact on employees living in the radius of 150 kilometer of the Dutch border and moving to the Netherlands. Belgium and German residents moving to the Netherlands will be in similar circumstances as employees moving to the Netherlands from outside the 150 kilometer radius, who can be eligible for the 30% ruling. 

Transition rules

For employees entitled to the 30% ruling on January 1, 2012 the following rules will apply. In principle, the employee should meet the conditions of the 30% ruling during the 10 years period of validity. A check should be made after 60 months. According to the Tax Plan 2012, employees benefitting from the 30% rule for more than 60 months on January 1, 2012, can continue to benefit from the ruling for the full 10 years. However, employees confronted with the check after January 1, 2012 - in general employees who obtained the 30% ruling after January 1, 2007 - have to meet the new conditions as described above.

It is quite likely that the above mentioned changes will have a significant impact for (Dutch) companies, due to the fact that the conditions for being eligible are tightened by introducing a salary norm, the extension of the reference period from 10 to 25 years and the implementation of the 150 kilometer radius for cross border employees. 

If you would like to obtain additional information or to discuss the (financial) impact of the changes for your organization, please contact: 

Elbert Kooman
Elbert.kooman@mazars.nl 
+31 (0)20 20 60 513

Alexander Rasink
Alexander.rasink@mazars.nl 
+31 (0)88 277 16 15

Marco Zimmerman
Marco.zimmerman@mazars.nl 
+31 (0)76 573 15 21