An clear update on the 30% ruling for 2024

My dear expat friends, as you might have heard or learned in the past few weeks the year 2024 will bring a lot of changes to the favourable 30% tax ruling in The Netherlands. Unfortunately, the years of good tax fortunes are slowly coming to an end and you will have to pay up your taxes just as the rest of us Dutchies. However, there are a lot of exceptions and transition periods which will make it easier for you to adjust to the new state of financial balance in your life. I noticed among my expats friends that there has been a lot of discussion and misinterpretation of the new laws. So in in this article I’ll try to be as clear as possible about the 30% ruling in 2024 and onward, addressing all the changes and transitions periods with examples. If you have any questions feel free to ask them in the comments.

The 30% ruling changes in 2024

On December 19, the Dutch Senate (Eerste Kamer) approved amendments to the 30% ruling, set to take effect on January 1, 2024. These amendments finalize the initial changes passed by the Dutch House of Representatives (Tweede Kamer) on October 27, 2023. I’ll aim to clarify these modifications and their potential impact on you, given your personal circumstances.

There are four significant changes to note:

  1. Modification of the maximum tax-free allowance (‘30/20/10% ruling’).
  2. Elimination of the partial non-resident taxpayer status.
  3. Implementation of a salary cap.
  4. Consequences of raising the salary thresholds.

I’ll try to clarify each section, we’ll delve into the upcoming alterations and the so-called ‘transitional law’ relevant to your specific circumstances. This will help you grasp how these changes might ultimately impact you.

The 30% ruling is a personal benefit

It’s important to remember that the 30% ruling is a personal benefit. These changes stem directly from legislative amendments and annual indexation, in other words they are new tax laws coming into effect in The Netherlands. Consequently, your organisation might not provide compensation for any resulting changes in your personal tax situation.

Also, be aware that these legislative modifications are likely to undergo further review during the next Dutch Budget Day (‘Prinsjesdag’) on the third Tuesday in September 2024 like every year. This is due to some opposition from government and corporate sectors.

Now let’s zoom in on the changes and how this might affect your personal financial situation.

Changes to the Maximum Tax-Free Allowance, the 30/20/10% ruling

Starting from January 1, 2024, the amendment to the 30% ruling introduces a more restrictive approach to this tax benefit. Currently, up to 30% of the Dutch taxable wage can be exempt from tax (subject to the ‘cap’ that will be applicable from 2024, as I’ll further discuss in the section about the salary cap. However, this percentage will be reduced over the duration of the 30% ruling. For the first 20 months, the tax-free percentage will stay at 30%. During the next 20 months, it will drop to a maximum of 20%. In the final 20 months, the highest tax-free percentage will be 10%. Despite these changes, the maximum duration of the 30% ruling will continue to be five years. Let me know in the comments if this makes sense to you.

Are you impacted by the new amendments?

If you currently benefit from the 30% ruling, evident in your last wage tax period of 2023 (your December 2023 payslip for example), you qualify for the so-called ‘transitional law‘ of the amendment. In this case, the new degressive (’30/20/10% ruling’) won’t affect you: the maximum tax-free percentage remains 30% of the Dutch taxable wage for the duration granted by the Dutch tax authorities. Lucky you!

For those changing employers within the Netherlands and aiming to transfer their 30% ruling, the transitional law will be applicable as long as the 30% ruling appears in their December 2023 payslip and the employment gap does not exceed 3 months.

However, if the 30% ruling is not apparent in your last wage tax period of 2023 (your December 2023 payslip) because you’re either in the midst of an application process or planning to apply for the 30% ruling in the future, you do not qualify for the transitional law. Consequently, the new degressive (’30/20/10% ruling’) will be applicable in your case.

It’s important to note that having an ongoing application and commencing work before 2024 won’t suffice for eligibility under the transitional law, even with retroactive correction of payslips. I’m sorry!

Abolishment of the Partial Non-Resident Taxpayer Regime

Now let’s zoom in on this fancy piece of Dutch legislative writings and get the facts straight. The second major change is related to the abolishment of the partial non-resident taxpayer regime.

Under this regime, individuals with the 30% ruling currently enjoy almost complete exemption from taxation in Box 2 (which relates to substantial interest in a company) and Box 3 (pertaining to income from savings and investments), although there are a few exceptions. This amendment is scheduled to take effect on January 1, 2025. With its implementation, holders of the 30% ruling will no longer be exempt from Box 2 and Box 3 taxes. Instead, they will become subject to taxation in the Netherlands on their worldwide income, assuming they are considered Dutch tax residents.

Raoul, please help me make sense of this gibberish!

Are you impacted by the new taxpayer regime as a Non-Resident?

If you are currently benefiting from the 30% ruling, as indicated on your last wage tax period of 2023, your December 2023 payslip, you qualify for the transitional law in the amendment. Consequently, the abolishment of the non-resident taxpayer status for you will be delayed until January 1, 2027, instead of the initially planned January 1, 2025. Whoop whoop!

And again for individuals changing employers within the Netherlands and wishing to transfer their 30% ruling, the transitional law will be applicable as long as the 30% ruling is included in their December 2023 payslip and the gap between employments is not more than 3 months. This is repetitive I know, but lucky you.

On the other hand, if the 30% ruling is not evident in your last wage tax period of 2023, your December 2023 payslip, due to an ongoing application, or if you plan to apply for the 30% ruling in the future, you will not be eligible for the transitional law. In these cases, the abolishment of the non-resident taxpayer status will take effect from January 1, 2025.

It’s important to note that for those with ongoing applications who started working before 2024, retroactively correcting payslips will not qualify them for the transitional law. Sorry, this is a bit messed up.

Considering that the Dutch tax return season spans from February to May of the year following the fiscal year in question, the changes for those eligible for the transitional law are expected to become apparent in 2028, while for those not eligible, the changes should be visible in 2026.

The new salary cap for the 30% ruling

Also starting from January 1, 2024, there will be a cap on the maximum tax-free allowance under the 30% ruling. This cap will be based on the regulated maximum remuneration for the public sector, which in 2024 is set at EUR 233.000 gross annual remuneration (this amount will be indexed annually). This legislation was enacted earlier, but its effects on income will only begin from January 1, 2024. However, for specific cases, transitional law provisions will maintain the current system up to January 1, 2026. Will write more on this later on.

In essence, while the 30% ruling tax-free allowance previously varied in proportion to an employee’s income, those earning over EUR 223.000 gross annually will now have their tax-free allowance limited to a maximum of EUR 66.900.

What happens when my gross anual income is less than 223.000?

If your annual income is less than EUR 233.000 gross which is including base salary, bonuses, and equity, this new salary cap will not affect you. Let’s celebrate!

However, if your annual income exceeds EUR 233.000 gross, including base salary, bonuses, and equity, transitional law provisions come into play for those who had the 30% ruling applied in their payroll during the last wage tax period of 2022, be sharp here not 2023 so typically shown in the December 2022 payslip. For these existing cases, the cap on the tax-free allowance will only be effective from January 1, 2026. This creates a transitional period of three years for this group. For individuals who were granted the 30% ruling in 2023, the cap will be applicable from January 1, 2024.

For those who changed employers within the Netherlands in 2023 and transferred their 30% ruling, the transitional law will apply as long as the 30% ruling is evident in their December 2022 payslip and there is no employment gap. If there is a gap between the end of the previous employment and the start of the new one, the cap on the 30% tax-free amount will also be applied from January 1, 2024.

Impact of the Increase of the Salary Thresholds

From January 1, 2024, the salary norm for the 30% ruling (the minimum taxable salary required under the specific expertise test to qualify for this Dutch expat tax regime) will increase by 9.9% due to annual indexation based on the Consumer Price (CP) index (many thanks to the insane inflation). The latter adjustment raises the new salary norms to:

  • Regular taxable salary norm of approximately EUR 46.107, including holiday allowance (2023: EUR 41.954), which translates to a gross annual salary of EUR 65.868, including holiday allowance. This is necessary to fully benefit from the 30% ruling.
  • The reduced salary threshold for employees under 30 with a qualifying master’s degree from a higher education institution of about EUR 35.048, including holiday allowance (2023: EUR 31.891). This means a gross annual salary of EUR 50.069, including holiday allowance, to fully benefit from the 30% ruling.

This significant increase in the salary criteria for 2023 means that the salary determining eligibility for the 30% ruling or its extent in case of a partial ruling has risen considerably.

A partial ruling is applicable to employees earning between EUR 46.107 and EUR 65.868 gross annually, including holiday allowance, in 2024 (between EUR 41.954 and EUR 59.956 in 2023).

Simply put, once an individual’s annual salary hits the minimum salary threshold of EUR 46.107 (the 2024 regular threshold), they may qualify for the 30% ruling scheme, with any income above EUR 46.107 being tax-free. For instance, if someone earns EUR 49.000 annually in 2024, EUR 1.931 of that would be tax-free. This EUR 1.931 represents 3.94% of the salary, hence they would benefit from a partial ruling; a “3.94% ruling”.

Once the annual income reaches the higher threshold of EUR 65.868, they can enjoy 30% of their income tax-free, which is capped at EUR 233.000 as mentioned before, known as a ‘full’ 30% ruling.

Some 30% ruling example cases explained

Well well that was a lot of fancy chit chat Raoul, now please show me some examples that will make my life easier but probably financially less attractive. Here you go;

Full Remaining full: For those with an annual salary above EUR 65,868, there is no change. Your 30% ruling will remain fully applicable.

Loss of the ruling: If your annual salary falls below EUR 46.107, you risk not meeting the eligibility criteria and could permanently lose your ruling. However, this will be determined based on your annual salary at the end of 2024; therefore, any guaranteed salary increases within the year will be considered and might elevate your salary above the new threshold. See there is some hope! Go get that extra merit increase.

From full to partial ruling: If your annual salary is between EUR 59.036 and EUR 65.868, your previously full 30% ruling will become partial. The percentage of your ruling will decrease by a maximum of 6.9%, leading to a slight reduction in your tax-free allowance. This change can affect your net income depending on where your salary falls within this range. For instance, someone earning EUR 60.000 in 2023 would enjoy a full 30% of their salary tax-free; in 2024, this percentage would drop to 23.2%. Hence, 6.8% of their salary, previously tax-exempt, will now be taxable. Like the decrease in the partial ruling, this adjustment is a regular occurrence but typically happens on a smaller scale. Again, any salary increase in 2024 can proportionally raise the percentage of your 30% ruling, possibly returning it to full.

Decrease of the partial ruling: For those with an annual salary between EUR 46.107 and EUR 59.036, the percentage of your ruling will decrease, ranging between 6.9% and 9%. As a result, your tax-free allowance will slightly decrease, which may impact your net income depending on your position within this range. For example, someone earning EUR 55.800 in 2023 would have 24.8% of their salary tax-free; in 2024, this would be reduced to 17.4%. This means 7.4% of their salary, which was previously tax-free, will now be subject to regular taxation. It’s important to note that this kind of adjustment happens every year, albeit on a smaller scale. Additionally, any salary increase in 2024 will proportionally and positively affect the percentage of your 30% ruling (merit increase, equity or bonus).

Yep, impossible calculations right? I know. Luckily, I can recommend you to use calculator as here you can easily calculate your new salary for 2024 including all rulings, taxes and other funky financial stuff.

Conclusion of the financial horror story

30% tax ruling help
30% tax ruling help

The landscape of the 30% ruling benefit in the Netherlands is undergoing a transformation, with significant changes on the horizon and already implemented from the 1st of January 2024. Thankfully, the Dutch authorities have implemented a ‘transitional law’ which plays a crucial role in cushioning the impact for those currently under the 30% ruling, particularly in areas like the phasing out of the partial non-resident taxpayer regime and the recalibration of the maximum tax-free allowance. At the same time, the introduction of a new salary cap and a substantial hike in the minimum salary thresholds are set to influence both ends of the spectrum for 30% ruling beneficiaries, leading to notable adjustments in their net incomes as I’ve previously discussed.

Let me know if you have any questions and I’ll try to answer them as soon as possible. And don’t worry, we still have bitterballen and stroopwaffels!

One reply on “An clear update on the 30% ruling for 2024”

Wow! This could be the most comprehensive material on this topic I’ve ever seen. Great job! But could you please provide some links to the official sources you were using? Especially, I am interested where did you find the information on how the “transitional law” would work.

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