The Netherlands | Revision of '30%-facility' and abolition of partial non-resident Dutch tax regime
Published on 17th Jan 2024
Revised 30%-facility as of 1 January 2024
The "30%-facility" is a tax incentive for employees who are seconded or hired from abroad to work in the Netherlands. This regime is revised with effect from 1 January 2024.
Prior to the revision of this regime, employees eligible for this regime did not pay taxes on up to 30% of their income for a maximum of five years.
As of 1 January 2024, the 30% ruling will gradually transition to a 10% ruling over five years. During the initial 20 months of the period, 30% of the income can still be received tax-free. In the following 20 months, this percentage decreases to 20%, and during the last 20 months, the tax-free allowance will be set at 10% of the income.
Transitional arrangements are in place for employees who were already granted the 30% ruling in December 2023. This applies to both existing employees with the 30% ruling and employees whose employment in the Netherlands began before 31 December 2023.
Abolition of the partial non-resident Dutch tax regime
Currently, employees who reside in the Netherlands and have the 30% ruling can opt for the so-called partial non-resident Dutch tax status. On this basis, income from non-Dutch sources is not taxed in the Netherlands.
As of 1 January 2024, this partial non-resident Dutch tax status is abolished with effect from 1 January 2025. Employees who were granted the 30% ruling by 31 December 2023, can still benefit from the partial non-resident Dutch tax status until the end of 2026 based on transitional arrangements.
These new laws lead to an additional reduction of tax benefits for incoming employees, in addition to the already-planned capping of the 30%-facility, which also applies as of 1 January 2024.
Cap of the 30%-facility vs actual expenses
As of 1 January 2024, the tax-free allowance under the 30%-facility is capped at 30% of the so-called "WNT-standard", which is a yearly indexed standard linked to top salaries (€233,000 for 2024).
Due to the revision of the 30%-facility as of 1 January 2024, the maximum tax-free allowance is significantly reduced given that the last 40 months of the application period are decreased to 20% and 10%.
There are transitional arrangements in place for this cap. For employees granted the 30% ruling in December 2023, the cap will not apply until 1 January 2026.
If the employees' extraterritorial expenses go beyond the capped amount allowed by the 30%-facility, it may be better to reimburse these costs tax-free instead of relying on the 30%-facility. It is advisable to conduct a comprehensive review of employee compensation packages to identify opportunities tailored to the case.
Impact assessment by Dutch tax team
Osborne Clarke Netherlands can conduct an in-depth analysis of how the new 30%-facility rules may affect organisations and provide insights into potential required adjustments.
We can review and assess employees' compensation packages to identify opportunities tailored to the situation, ensuring alignment with the latest regulations. We can examine the agreed 30%-facility rules in the employment contract to ensure they align with the latest changes, providing recommendations for any necessary amendments.
Please get in touch with your usual Osborne Clarke contact or one of the experts below if you have any queries or would like to discuss further.
