From 30% to 27% expat ruling

The Dutch 30% ruling is a well-known tax advantage for highly skilled expats moving to the Netherlands. It allows eligible employees to receive up to 30% of their gross salary tax-free, compensating for the additional costs of working abroad. However, it has been announced that starting in 2027, this popular tax break will have a reduced exemption of 27%.

What Is the Dutch 30% Ruling?

The 30% ruling is a tax advantage for employees recruited from abroad to work in the Netherlands. This ruling allows employers to pay out up to 30% of an expat's salary tax-free, resulting in a lower tax burden. It's designed to cover the extra expenses that expats incur when relocating and working in the Netherlands.

Upcoming Change: From 30% to 27%

From January 1, 2027, the 30% ruling will be reduced to 27%. This means that instead of 30% of your gross income being tax-free, it will be limited to 27%. This adjustment is part of the Dutch government's broader efforts to reform the tax system and is expected to impact both current and future beneficiaries of the ruling. Although this may sound unfavourable, the government actually reverses the 30%-20%-10%-rule, meaning that the 30% tax-free allowance would decrease to 20% after 20 months and to 10% after 40 months. Therefore, the reduction to a constant 27% is considered more favorable than the initial 30%-20%-10%-rule. Unfortuantely, no announcements have been made regarding the potential reversal of the partial non-resident status, which will in principle be terminated per 1 January 2025.

Who Will Be Affected?

• Current Expats: If you are currently benefiting from the 30% ruling, your tax-free allowance will drop from 30% to 27% starting in 2027.
• New Expats: Those arriving in the Netherlands from 2027 onwards will be subject to the new 27% ruling immediately.

Why Is This Change Happening?

The Dutch government is constantly reviewing tax policies to ensure fairness and balance in the system. The adjustment to 27% aims to align the ruling more closely with other fiscal measures and address concerns that the 30% rate was too generous compared to the actual costs incurred by expats.

How Will This Affect Your Income?

The reduction from 30% to 27% means a slight increase in the taxable portion of your salary. This could result in a higher overall tax bill. However, it’s essential to note that the ruling still offers significant savings compared to paying full taxes on your entire income.

What Should Expats Do?

1. Plan Ahead: If you are currently on the 30% ruling, be prepared for the change. Review your financial plans and budget accordingly.
2. Consult with a Tax Advisor: Understanding the exact impact on your personal situation is crucial. A tax advisor specialized in expat taxation can provide insights and suggest strategies to mitigate any adverse effects.
3. Stay Updated: The Dutch government may release more details as the implementation date approaches. Keep an eye on official announcements to stay informed.

Conclusion

While the reduction to 27% may seem like a drawback, the Dutch ruling remains one of the most attractive expat tax benefits in Europe. By understanding these changes and planning ahead, you can still maximize your financial advantage while working in the Netherlands.

Need help navigating the new tax landscape? Contact our specialized team of expat tax advisors for personalized guidance!

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