Aimed at attracting highly skilled workers in key sectors, the preferential tax policy currently allows eligible expats to receive 30% of their gross salary tax-free for up to five years. This helps offset the financial burden associated with moving to and from the Netherlands, and the potential differences in costs of living, social security, and tax regimes between their home country and the Netherlands.
In a significant update, the 30% ruling will decrease to a 27% ruling, effective 1 January 2027. While this change represents a minor reduction in the tax-free portion of an expat’s salary, the advantage remains robust enough to be competitive in attracting international talent.
The Netherlands turns back on 30/20/10 ruling after consultations with business community
Initially, as of 1 January 2024, the Netherlands had introduced more severe restrictions to the tax scheme, involving a ‘30/20/10’ proposal that would have gradually reduced the amount of tax-free advantage over a five-year period. Expats would have benefitted from 30% for the first 20 months, 20% for the following 20 months, and 10% for the remaining 20 months of the five years.
The new adjustments represent a scaling back of this initial plan. Businesses and other stakeholders voiced concerns that the ‘30/20/10’ rule would make it difficult to attract foreign talent, and the Ministry of Finance conducted research to assess the impact on the Dutch economy. It revealed that the restriction would negatively impact the business environment in the Netherlands and increase administrative burdens. The 27% ruling was chosen as a viable alternative.
Existing assignees are unaffected until 2027
In the short term, this is excellent news for assignees and employers because nothing changes. The 30% ruling will remain fully intact until the end of 2026, offering continuity and stability for both employers and assignees.
Employers can reassure current workers who enjoy the benefit that those who held 30% ruling status before 1 January 2024 will retain the full 30% ruling throughout their assignment until the maximum five years.
Newer employees who qualified for the tax advantage after 1 January 2024 will continue to receive the full benefits of the 30% ruling until the beginning of 2027, after which the tax-free share of their salary will be reduced to 27%.
Equally important to know is that, from 1 January 2025, international employees who signed up for the 30% rule after 1 January 2024 can no longer opt to be treated as partial foreign taxpayers (the so-called deemed non-resident status). This means they will have a full, unlimited income tax base in the Netherlands and that all their savings and investments (foreign and domestic) will be taxable in the Netherlands as of the Dutch income tax return filing for 2025.
Companies that rely on foreign talent have just over two years to adjust their mobility planning and ensure that strategies are in place to handle the transition, avoiding potential last-minute complications.
Looking ahead to 2027, the impact of the reduced tax-free allowance is expected to be minimal for most international employees. Luckily, even with a 27% ruling, the country’s tax incentives remain competitive compared to other European nations, maintaining its appeal to top-tier talent.
The salary threshold for the tax advantage will increase
Expats are eligible for the preferential tax policy if they are highly skilled in an area where expertise is scarce in the Dutch labour market. This skill level is determined mainly by the employee meeting a salary threshold. As of 1 January 2027, this salary threshold increases to EUR 50,436 gross per year, or EUR 38,388 for employees under 30 years old with a master’s degree.
Preliminary assessment for expats
Starting 1 January 2025, expats granted the 30% ruling from January 1, 2024, will no longer have the option for deemed non-residency. Additionally, the reduced general tax credit will now also be calculated based on Box 2 and 3 income. Therefore, it is advisable for individual expats to review their Dutch tax situation at the beginning of 2025. If necessary, they should request a preliminary assessment for 2025 to avoid incurring Dutch tax interest when filing their 2025 income tax return in 2026.
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