Tax Plan 2025: Adjustments to 30% ruling

This article stems from the tax changes announced in the 2025 Tax Plan (Dutch).

The underlying rationale is that employees who temporarily come to work in the Netherlands from abroad may still have various costs in their home country, such as housing expenses. Moving to the Netherlands incurs similar costs. These are referred to as extraterritorial costs (ET-costs).

Tip: If the actual costs are higher or the employee does not qualify for the 30%-ruling, the actual ET-costs may be reimbursed.

Adjustments as of January 1, 2024

As of January 1, 2024, several adjustments to the 30%-ruling have come into effect:

Capping of the 30% Ruling

Starting in 2024, the application of the 30% ruling is limited to the WNT-norm (the Balkenende norm). The WNT-norm for 2024 is € 233,000 and is indexed annually. For the portion of the salary exceeding this norm, the 30% ruling can no longer be applied as of January 1, 2024. There is a transitional arrangement for employees whose salaries were subject to the 30% ruling in December 2022. For these employees, the capping will not apply from January 1, 2024, but from January 1, 2026.

Further Reduction

The 30%-ruling was further reduced as of January 1, 2024. From January 1, 2024, a maximum of 30% of the salary can be reimbursed tax-free during the first 20 months of the period. In the following 20 months, this is reduced to a maximum of 20%, and during the last 20 months, this will be reduced to a maximum of 10%. A transitional arrangement applies to employees who were already receiving a tax-free 30% allowance in the last pay period of 2023 and who held a 30%-ruling decision. These employees, under the transitional arrangement, retain the right to receive up to 30% of the taxable salary tax-free for up to 60 months.

• Also read: Further Reduction of the 30% Ruling (published on January 22, 2024).

Changes to the 30% Ruling in the 2025 Tax Plan

The changes as of January 1, 2024, made the scheme complex and met with much resistance from businesses. Therefore, it has been decided to modify the 30%-ruling again as of January 1, 2025. The following changes will be implemented from 2025:

Reversing the Reduction

The announced reduction from 30%-20%-10% will be completely reversed. The government has concluded that the reduction may have too much impact on the business climate. Therefore, the percentage will remain at 30% for the years 2025 and 2026.

Adjusting the Percentage and Increasing Salary Norms

From 2027, the maximum percentage of the tax-free allowance throughout the duration of the scheme will be 27%. As of this date, the salary norms required to qualify for the scheme will also be increased and aligned with the salary norms applicable to certain highly skilled migrants. The increases are as follows:

• The general salary norm will increase from € 46,107 to € 50,436 (2024 prices).
• The salary norm for incoming employees under 30 years old with a master’s degree will increase from € 35,048 to € 38,338 (2024 prices). The final salary norms for 2027 are not yet known. These will be indexed annually, so the 2024 price level is currently used for these norms.

Transitional Provisions

If the 30%-ruling was already applied before 2024, the transitional provisions will apply for the entire duration. The 30% rate and the old (lower) salary norms will continue to apply.

Abolition of Partial Foreign Tax Liability Remains

There is currently no amendment in the Tax Plan regarding partial foreign tax liability. An employee to whom the 30%-ruling applies can currently opt for partial foreign tax liability in the income tax return. In that case, the employee is considered a non-resident taxpayer for box 2 and box 3. The 2024 tax plan abolishes this partial foreign tax liability for new 30%- rulings (with transitional provisions for 30%-rulings before 2024). This means that for employees to whom the 30%-ruling applies after December 31, 2023, the partial foreign tax liability will cease to exist from the year 2025. The 2025 tax return will need to take box 2 and box 3 income into account. Employees who were already using the 30%-ruling by December 31, 2023, can continue to use the partial foreign tax liability until December 31, 2026.

What Should You Do?

Due to the successive changes and the associated transitional provisions, the 30%-ruling has become a rather complex scheme. An error in applying the 30%-ruling in payroll administration can lead to the entire scheme being retroactively revoked. Therefore, carefully check if the 30%-ruling is currently being applied correctly.

More Information

Would you like to know more about the 30% ruling? The payroll tax specialists at CROP are happy to help you map out the impact of all changes and advise you on the possible consequences for incoming employees and your organization due to the abolition of partial foreign tax liability in 2025. Contact us at loonheffingen@crop.nl.