The new Dutch government plans to reduce the duration of tax break for expats known as the 30% ruling with 3 years (therefore with 37.5%!), according to the coalition agreement published on 10 October 2017. Some 60,000 people currently claim the tax break, which effectively means they do not pay tax on the first 30% of their salary. Indian nationals are the most likely to use the ruling, followed by British, American and Italian expats.

Conditions to claim the 30% ruling To claim the ruling in 2018, most expats have to earn at least € 37,296 a year (or from € 53,280 with a full 30% tax free reimbursement, exceptions apply to this minimum salary requirement) and must have lived at least 150 kilometers from a border with the Netherlands. Various other conditions apply for the ruling. Five years tax advantage instead of eight years A disastrous report for the Finance Ministry published this June said that the 30% ruling facility is too generous. This ‘penny-wise-pound-foolish idea’ was taken over by the coalition (likely because expats do not have any voting rights in the Netherlands). The coalition agreement mentions that international workers will only be able to benefit from the ruling for five years instead of eight years. Shorter 30% ruling not only for new cases! Virtually everybody seems to think that this new shorter 30% ruling will apply only to new cases as from 2019 (when the agreement will be implemented in tax law) and that therefore all existing 30% ruling will be grandfathered to eight years. In my view this is not the case, also all existing 30% rulings will be shortened to 5 years following the coalition agreement! Why do I think this? On page 63 of the coalition agreement 284 million Euro is already booked as increase of the budget in 2019 (and also in following years). If the measure would be implemented for new cases only, no budget effect would arise for the first five years. Current 30% holders lose their rights? Is it possible? In principle yes: all 30% rulings state that the ruling is “valid depending on current laws”. This would nevertheless be extremely bad legislation from the Dutch government as it would mean providing a ‘de facto’ retro-active force to this already draconic measure. Retro-active force can only be implemented in “exceptional cases”(such as tax evasion and abuse) according to a letter from the Ministry of Finance of 8 October 1996. I do not see any justification for such a retro-active measure but all current 30% holders must be aware that they could end up either losing their status immediately on 1 January 2019 or 3 years earlier than initially promised by our government. Please contact me if you have specific questions about your case.