Netherlands: Tax Exemption for Highly Skilled Foreign Workers May be Capped

Under the so-called “30% Ruling”, eligible highly skilled foreign workers are exempt from Dutch income taxes for up to 30% of their salary for five years of work. Draft legislation that is expected to be submitted to parliament in September would cap this tax exemption at 30% of the regulated maximum public sector remuneration (“Balkenende norm”, currently EUR 216,000), even if a foreign national’s salary is higher. So, for example, if a foreign worker is paid EUR 250,000 annually, only EUR 64,800 of their salary would be tax-exempt (30% of the current maximum public sector remuneration) rather than EUR 75,000 (30% of their annual salary). The legislation is expected to be approved without significant changes before the end of this year. Once passed, the cap would apply to new applicants starting January 1, 2024, or starting January 1, 2026 for those currently using the 30% ruling. Highly skilled foreign workers currently using the 30% ruling are likely to see an increase in their Dutch tax liability due to the cap.