This article is about the Dutch 30 percent ruling and is intended for:
- Employees who have been granted the Dutch 30 percent ruling
- Employers with employees who have been granted the Dutch 30 percent ruling
- Americans who have been granted the Dutch 30 percent ruling
The 30 percent ruling in general
Under this Dutch 30 percent ruling, employers can pay out part of the remuneration they pay to their employees tax free. This ruling used to apply for a maximum period of 8 years, however, it will apply for only 5 years as from 2019. See our earlier post for more details about this ruling.
What if you already have the ruling granted for a period of 8 years?
The original proposal stated that this change will also apply to existing rulings, without any transitional period. Luckily, a transitional ruling has been implemented. As a result, the rulings that end in 2019 or 2020 will continue to apply for 8 years. So that means that this transitional ruling will apply to those which are in their 7th or 8th year.
International School fees
International school fees may continue to be remunerated tax free for maximum five years unless the above transitional ruling applies.
Preparation is important
It is important to prepare yourself to understand what the financial impact will be with or without the Dutch 30 percent ruling. Of course, Langendorff Tax Consultancy can help with this by making preliminary calculations.
Above all, for Americans the financial impact may be substantial. That is, if they also work outside the Netherlands. See our earlier post about the additional attractive arrangement for US persons that may apply to them. As a result, ensure that you are prepared.
Employee to discuss the impact with employer (or vice versa)
Many of the employment contracts contain terms about the remuneration that will apply after the ending of the Dutch 30 percent ruling. Very important is that these terms were generally based on the assumption that the ruling would last for 8 years. It is therefore key to discuss (with the employee and employer) what the impact will be on the remuneration after 2019.
In addition, the impact may especially be substantial for employers if a net salary arrangement was granted.
Lastly, always good to check the contract because many of the employment contracts do not contain any agreement at all about the remuneration after the Dutch 30 percent ruling! Action is recommended.
Objecting against these rulings
Many feel this change is unfair because the ruling was initially granted for 8 years. We do understand that feeling. Also, the fierce lobby to avoid this change has not worked. The only possible way for this rule not to be applied is to object and to go to court. Nevertheless, for the majority of the cases we think it is very unlikely that would result in a successful outcome. The problem is that the rulings themselves generally contained a small clause. The essence of this clause is that the Dutch 30 percent ruling is granted to the extent that if new legislation is implemented the ruling may be reduced in time or even withdrawn completely. Also, even if the courts go along with the objection, the question is whether the effort and expenses will be lower than the possible benefit. If this clause was not stated on your ruling however, you may have a chance! Feel free to contact us to discuss any queries you may have.
What can Langendorff Tax Consultancy do for you
We can help both employee and employer with the practical implications of this change in the Dutch 30 percent ruling by:
- Making draft calculations to bring the financial impact to light for both employers and employees,
- Check your employment contract to identify the remuneration after ending of the Dutch 30 percent ruling,
- Check whether filing an objection against the Dutch wage tax returns may be useful
- Advising about the Dutch 30 percent ruling in general.