At the end of 2017, the Dutch government presented a plan to reduce the maximum duration of the 30%-ruling. These plans resulted in an announcement from the Dutch government in the beginning of 2018 to reduce the maximum duration of the 30%-ruling from eight to five years. This change in legislation entered into force as per January 1, 2019 and initially, no transitional law was planned for existing cases. This meant that the reduction would not only apply to qualifying employees that relocated to the Netherlands after January 1, 2019, but also to employees that were already benefitting from the 30%-ruling before that date. On October 15, 2018, the Dutch government introduced transitional law for the employees for whom the 30%-ruling would end in 2019 or 2020 as a result of the shortening of the maximum duration from eight to five years. The transitional law gave many employees, for whom the 30%-ruling would otherwise end per December 31, 2018, up to two more years to benefit from the 30%-ruling. This transitional period will expire per the end of this year. What are the most important tax consequences and tax planning opportunities for the employees that will lose the 30%-ruling per January 1, 2021?
As of January 1, 2021, the 30%-ruling cannot be applied on the employees’ employment income anymore as a result of which the net income will decrease. The employees with an annual employment income of more than € 70,000 will be hit hardest since this group is subject to tax at the marginal income tax rate of 49,5%. Another important change is that these employees will lose the partial non-resident status as per 2021. This means that these employees will have to declare their worldwide savings and investments (Box 3) and have to pay income tax in case the value of the worldwide savings and investment exceeds the threshold of € 50,000, or € 100,000 in case the employee has a fiscal partner.
The expiration of the 30%-ruling will have a negative impact on the employees’ net spendable income and wealth tax position. Below are a few tax planning opportunities this employee can think of:
It needs no explanation that the group of employees that will lose the 30%-ruling per the end of the year will suffer a financial loss, but this should not preventing this group to look for opportunities in order to minimize this loss. If you would like to receive further information about the tax consequences and/or would like to know more about the tax planning opportunities in your specific situation, please do not hesitate to contact us. We are more than happy assist and think of a tailor-made solution for you!
This publication has been created in collaboration with mr. Daniel van den Helder, a colleague of mine.