Limitation 30% ruling to 5 years

April 23, 2018 | Blog

The Netherlands has a special tax facility for employees hired from abroad with a specific expertise that is scarce or not present on the Dutch labour market: the "30%-ruling". This facility enables an employer to pay an employee a tax-free allowance up to a maximum of 30% of the employment income. This tax-free allowance is meant to cover the additional expenses related to the (temporary) stay outside the home country.

In general the 30%-ruling is applicable for a maximum period of 8 years. On 20 April 2018 the Dutch Cabinet announced that with effect from 1 January 2019 the duration of the maximum period will be reduced from 8 to 5 years. This will be included in the 2019 Tax Plan to be presented on Budget Day in September.

It is in particular remarkable that the limitation to 5 years also applies to employees that are currently benefiting from the 30% ruling.

Under the 30% ruling, an employee who is a resident taxpayer of the Netherlands can elect to be treated as a "partial non-resident". As a result, the employee is only subject to taxation on income from employment, income from a substantial interest in a Dutch company and Dutch real estate. Due to the proposed limitation, also the period in which a resident taxpayer can elect to be treated as a "partial non-resident" will be limited from 8 to 5 years.  

We will keep you informed on further developments.

If you have any questions about this subject, please contact Joost van Benthum.

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