Changes to the 30%-ruling
20 December 2011
The 30%-ruling is a Dutch tax facility available for employees who come to work in the Netherlands and whom have specific expertise that is scarce on the Dutch labour market.
The 30%-ruling, in essence, means that the employer can pay 30% of the employee’s salary in the form of a tax free allowance for extra territorial expenses.
As part of its budget plans for 2012, the Dutch Government announced a number of changes to the 30%-ruling. Below, we have outlined the main changes.
1. Salary level and specific expertise
The specific expertise test will now be determined by a salary level per category of employee.
| Category | Taxable Salary | Including 30%-allowance | Further Conditions |
| General | € 35,000 | € 50,000 | |
| Scientists/ Researchers | N/a | N/a | Must work for educational institutions or subsidized research facilities. |
| Young Masters | € 26,605 | € 38,007 | See point 6 below |
| Doctoral graduates | € 26,605 | € 38,007 | See point 3 below |
In addition, the employee’s specific expertise must be scarcely available on the Dutch labour market. Scarcity will be determined by the following three criteria (formerly used for determining specific expertise):
• The level of education
• The relevant work experience
• The salary level
2. Maximum period
The maximum period of the 30%-ruling will be reduced from 10 to 8 years. This will apply to new cases as of January 1, 2012.
3. Doctoral Candidates / Graduates
Doctoral candidates/graduates under the age of 30, who obtain – or are in the process of obtaining – their doctorate and find a job within 1 year of obtaining their doctorate and have a taxable salary of at least € 26,605.-, will qualify for the ruling. This covers not only doctoral candidates/graduates from Dutch institutions, but also doctoral candidates/ graduates from foreign institutions (even if hired from within the 150km zone).
4. Cross border employees – 150km test
Employees who live close to the Dutch border, are deemed to have less (extraterritorial) costs resulting from their employment in the Netherlands than employees who live further off. In the 2012 Tax Budget, an extra requirement is set to qualify for the 30% ruling: The employee who is hired, used to live at a distance of more than 150 kilometres from the Dutch border during at least 16 out of 24 months prior to the commencement of the employment in the Netherlands.
The 150 kilometres test will also apply to employees with a 30% ruling that is already valid prior to 1 January 2012, but whom have not yet entered the 6th year of the ruling before January 1, 2012. These employees will in any event continue to be entitled to the 30% ruling during the first 5 years of the period of validity.
Example: An employee holds a 30% ruling from 1 July 2011 until 1 July 2021. Upon commencement of the 30% ruling, this employee used to live at a distance of less than 150 kilometres from the Dutch border. The 30% ruling remains valid until 1 July 2016.
The 150km test will not be applicable for employees whom already entered the 6th year of the 30%-ruling prior to January 1, 2012.
5. Look back period
Under the current 30% ruling, the period of validity of the 30% ruling is reduced by previous periods of employment or residence in the Netherlands. This is different if these previous periods have terminated more than 10 years ago whilst the employee has not lived and worked in the Netherlands during that period.
Periods of residence and employment that terminated more than 15 years ago, are not counted for with respect to the look back period. Based on the draft wording of the 2012 Tax Budget, these look back periods will be increased to 25 years. This means that all previous periods of residence and employment in the Netherlands during these 25 years, and previous periods of residence and employment in the Netherlands that commenced more than 25 years ago but terminated less than 25 years ago, will reduce the period of validity of the 30% ruling. In addition, periods of employment outside of the Netherlands, but for a Dutch company, will also fall under the scope of the 25 years look back period. The 25 years look back period will only be applicable to employees who commence their employment after 31 December 2011.
6. 30%-ruling on variable wage elements
In de proposed new rules, the 30%-ruling will terminate by the end of the employment in the Netherlands. This means that the 30%-ruling cannot be applied anymore on (variable) salary payments which were not yet “final/definite” at the time the employment in the Netherlands ended. It is not yet clear how the term “final” has to be interpreted. Does it mean that the 30%-ruling is only applicable if the taxable moment occurs before the end of the employment in the Netherlands, or is it sufficient that the employee has an unconditional right to the payment at the end of the employment in the Netherlands? The Dutch tax authorities should bring more clarity to this.
7. Transitional ruling
Based on the transition ruling, 30%-rulings that are granted and applied before January 1, 2012 will be respected. However, based on the current legislation at the start of the 6th year of application of the 30%-ruling an intermediate test should be done. Employees who have entered the 6th year of the 30%-ruling before January 1, 2012 will not be affected by the new measures. Employees who will enter the 6th year of the 30%-ruling after January 1, 2012 may be affected by the new measures.
According to the explanation of the government the salary norm and 150 kilometer norm have to be met at the time of the intermediate test, otherwise the 30%-ruling cannot be continued until the end of the original approval document. Based on the literal text of the law we doubt whether the 150 kilometer norm can be applied at the intermediate test.
The discount rule applied on the original grant of the 30%-ruling will be respected at the time of the intermediate test. This means that the new 25 years discount rule will not apply on 30%-rulings already granted and applied before January 1, 2012.
It is still unclear whether the transition ruling will be applicable if:
• the 30%-ruling is granted, but not applied in the payroll before January 1, 2012, and/or
• the request for the 30%-ruling was filed to late as a result of which it will only be applicable for a period starting after January 1, 2012.
8. Conclusion
The new legislation regarding the 30%-ruling has an enormous impact on employers and its expats, even when taking into account the relaxed measures that were implemented compared to the original plan. There are still a lot of questions on the exact details of the new rules. The Dutch tax authorities informed us that an additional explanation of the new 30%-ruling will be prepared and issued shortly.
