Starting January 1, 2024, the 30%-ruling for expatriates in the Netherlands is undergoing a significant overhaul.

The current legislation, which allows expats to benefit from a 30% tax reduction on their income for a maximum period of 5 years (equivalent to 60 months), is undergoing a transformation. Under the new legislation, this generous allowance will be divided into three phases, as follows:

The New Legislation Breakdown:

  • First 20 Months (30%-Allowance): During the initial phase, expats will still enjoy a 30% reduction in their taxable income.
  • Subsequent 20 Months (20%-Allowance): In the following stage, expats will see a reduction to a 20% allowance.
  • Last 20 Months (10%-Allowance): Finally, in the last phase, the tax advantage will further diminish to a 10% allowance.

However, there is good news for expats who are already benefiting from the 30% ruling. The Dutch government protects pre-December 2023 30%-ruling beneficiaries from new regulations with a transitional agreement.

This provision offers a degree of continuity and reassurance to those who have structured their financial plans around the existing rules.

In addition to this alteration, a second significant amendment has been passed: the removal of the option for expats to elect non-resident tax status. This change is set to take effect on January 1, 2025. Historically, choosing non-resident tax status spared expats from paying tax on Box 2 and Box 3 income. This is changing, potentially affecting tax obligations.

A transitional arrangement enables expats using non-resident tax status and the 30% ruling by December 2023 to continue until at least 2026. This grace period acknowledges the need for a smooth transition and allows expats to adapt to the changing tax landscape. These changes require careful planning and adaptation to ensure expats continue to benefit from favourable tax arrangements.

Finally, we note that the 2024 Tax Plan Package, of which these amendments are part, must still be approved by the Senate. If you are in need of some help understanding this matter, we advise you to contact your tax advisor.

We will keep you posted!