Recent developments in Dutch legislation are set to bring significant alterations to the 30% ruling, impacting expatriates and their tax benefits. The ruling, which currently grants a five-year tax break, enabling a 30% income tax exemption and providing a ‘partial tax resident’ status, is undergoing substantial modifications, affecting both existing and future beneficiaries.
The Lower House (Tweede Kamer) on October 25, 2023, passed two crucial amendments within the tax plan for 2024. The first amendment, proposed by Peter Omtzigt, involves a gradual reduction in the discount for new expatriates benefiting from the 30% ruling. The second amendment aims at the complete abolition of the partial tax resident status from 2025.
According to the approved changes, for those receiving the ruling after January 1, 2024, the discount will gradually decrease over a five-year period. Initially set at 30%, it will decrease to 20% and further to 10% in the following months.
Additionally, the possibility of obtaining the partial tax resident status will cease for new ruling holders from January 1, 2025. Current beneficiaries will see their status come to an end by January 1, 2027, subject to continuous employment.
The reasons behind these changes, as stated by Peter Omtzigt, point towards addressing concerns regarding the impact of wealthy expatriates on the housing market in Amsterdam. However, it’s evident that the amendments are aimed at closing budgetary gaps, with an estimated contribution of €194 million per year to the national treasury by 2029. The allocation of these funds aims to reduce the interest rates on student loans.
The proposed changes have garnered mixed reactions. Dutch unions and students have welcomed the alterations, while various business sectors relying on expatriates and universities have expressed strong opposition.
The future of these changes hinges on the upcoming vote by the Upper House (Eerste kamer) scheduled for December 19. If passed, these amendments will require ratification by the King.
For expatriates already in the Netherlands, employers still have the choice between applying the 30% discount or compensating extraterritorial expenses. These changes raise significant questions about the duration of existing rulings, employment gaps, and the administrative challenges for tax authorities.
As for those planning to move to the Netherlands, acting swiftly could be advantageous. Those arriving before the year-end might benefit from the existing 30% ruling provisions and associated tax benefits.
This transformation in Dutch tax law is set to reshape the expatriate landscape, creating a wave of anticipation and uncertainty among affected individuals and businesses. Stay tuned for updates as the legislation moves through the legislative process.