Announced decrease tax-free percentage

Based on an amendment to the 2024 Tax Plan adopted by the House of Representatives, the 30% tax ruling for reimbursement of extraterritorial costs has been simplified as of January 1, 2024. Although the total duration of the scheme is still sixty months, the percentage that can be designated as reimbursement for extraterritorial costs decreases from 30% during the first twenty months to 20% in the following twenty months and 10% in the last twenty months of the ruling. The 30% ruling has also been capped since 2024 by capping it at a base salary of € 233,000.

 

Withdrawal of the plan

The government wants to largely reverse the decrease from 30% to 10% and return to a fixed percentage. In the years 2025 and 2026 this will be 30%. From 2027, 27% of the salary can be designated as tax-free compensation for extraterritorial costs for the entire duration of the ruling. On the other hand, the salary standard will be increased from 2027. The new scheme will apply to employees to whom the 30% ruling was applied for the first time on or after January 1, 2024. Transitional law applies to employees who already made use of the 30% ruling before 2024.

 

Partial foreign tax liability

The Tax Plan currently does not include any changes with regard to partial foreign tax liability.

An employee to whom the 30% ruling applies can currently still opt for partial foreign tax liability in the personal income tax return. In that case, the employee is regarded as a foreign taxpayer for box 2 and box 3. In the 2024 Tax Plan, this partial foreign tax liability has been abolished for new 30% rulings (with transitional law for rulings from before 2024).

This means that for employees to whom the 30% ruling became valid after December 31, 2023, the partial foreign tax liability will terminate from the year 2025. In 2025, box 2 and box 3 income will have to be reported in the tax return. Employees who already made use of the 30% ruling by December 31, 2023 can continue to make use of the partial foreign tax liability until December 31, 2026.

 

Dutch Tax Law remains under attack and announced changes may be contradictory with the happening of events later! Be well prepared in your future tax planning!

 

Authors: Leo Oudshoorn and Kavita Sewkaransing, Wecountancy Expat Services www.wecountancy.com.