On October 26, 2023, the Dutch House of Representatives passed an amendment to reduce the 30% Ruling, which is a very popular and highly advantageous tax advantage for migrant workers in the Netherlands.
If you are on the 30% Ruling or know anyone who is, you’ve probably heard about how amazing the benefits are. But the Dutch government wants to limit those benefits going forward, starting in January 2024.
In this blog post, we will explain what they are proposing, why this is not set in stone yet, and what people who will be affected by these changes can do to plan ahead.
Currently, highly skilled migrants who are recruited to work from abroad in the Netherlands, and who meet certain criteria, can get the 30% Ruling.
The 30% Ruling means that only 70% of your income is subject to tax, or 30% is tax-free.
Another benefit is that people on the 30% Ruling are not subject to the Dutch Wealth Tax, so their wealth accumulated outside of the Netherlands is not taxed in the Netherlands.
This is a huge advantage, especially for Americans coming to the Netherlands who may have savings, stocks, or other investments at home and who want to come and live and work in the Netherlands, but they don’t want to be taxed on their assets back home.
The Dutch House of Representatives proposed to keep the 30% Ruling a five-year ruling, but instead of allowing 30% tax-free income for the entire period, they proposed the first 20 months will have a 30% ruling, the next 20 months will have a 20% ruling, and the final 20 months to have a 10% ruling.
The other piece of the proposed legislation is that the Wealth Tax will in fact apply to those people who are under the new scheme.
They did propose that people who already have the 30% Ruling as of December 31st, 2023, will have a transitory special ruling, but they did not give any information yet on what that special ruling might entail.
We’re waiting to see what’s going to happen for those who already have the 30% Ruling, and nothing is set in stone yet, but we know that it’s very likely that anyone who gets the 30% ruling from January 1st, 2024 on will be under new rules.
The proposed legislation will be debated in the Dutch chambers in the middle of December over a couple of days, but right now, it seems likely to pass.
If it passes, the new legislation will affect Americans in the Netherlands in a big way. Most notably, people who are counting on having 30% tax-fee income for 5 years not owing Wealth Tax may not be able to count on those benefits anymore.
While at this point we can only speculate on how the new legislation will affect people who are already on the 30% Ruling, if we look backwards in time we see that the last time that the Dutch government made a change to the 30% Ruling, the people who already had it were not grandfathered in, in any way. People who had an eight-year 30% Ruling were immediately moved into a five-year scheme. If they were already past 5 years into the 30% Ruling, the 30% Ruling was removed immediately.
If you expect that changes to the 30% Ruling could affect you and your tax plan, you definitely need to call your tax advisor. Your tax advisor can help to show you what your taxes may look like after you lose the 30% Ruling so you can determine if tax obligations are going to play into your plan to stay in the Netherlands for the full period of five years or beyond.
BNC Tax is a tax preparation and planning firm for U.S. citizens living abroad. We specialize in expat tax preparation and expat tax issues, including how foreign income, businesses, or rental properties affect your U.S. tax liability, as well as how to use tax benefits such as the Foreign Earned Income Exclusion and Foreign Tax Credits to your advantage. We also help “Accidental Americans” enter the Streamline Program.
To make an appointment for a consultation, visit our appointment booking calendar at www.bnctax.com/appointment