The Netherlands: ‘30% Rule’ Preferential Tax Rule Changes Forthcoming

• New rule. From January 1, 2027, a new tax-free percentage of 27% instead of 30% will apply to each foreign employee’s salary. This reduced percentage does not apply to employees who held 30% ruling status prior to January 1, 2024.
• Transitional measures.
  • Those holding 30% ruling status prior to January 1, 2024 will maintain the 30% ruling as the maximum percentage throughout the duration of their assignment.
  • Those holding 30% ruling status as of January 1, 2024 will receive the 30% benefit until January 1, 2027. Starting January 1, 2027, they will only be tax exempt on up to 27% of their salary.
• Higher salary criteria.
  • From January 1, 2027, the minimum salary threshold for those subject to the 30% ruling will be increased to EUR 50,436 gross per year (or EUR 38,388 for employees under 30 years old who hold a Master’s degree).
  • Those holding the 30% ruling status prior to January 1, 2024 will not be impacted by these salary thresholds.
  • Those holding the 30% ruling status as of January 1, 2024 will be able to make use of current salary thresholds until January 1, 2027, after which they will need to meet increased salary thresholds.
  • Salary thresholds for the 30% ruling benefit are indexed each year. This standard indexation should not be confused with other minimum salary increases. Final salary indexations have not yet been confirmed by the tax authorities.

Though the adjustments to the 30% ruling scheme are less severe than the original ‘30/20/10’ proposal, they will still require careful consideration and proactive workforce planning.

Businesses in the Netherlands have historically depended on the 30% ruling scheme to attract international talent, given the differences in employment and social security taxation across the world and the limited pool of available highly skilled workers. As the demand for specialized skills continues, even a 3% reduction to the 30% ruling may have a significant impact on labor shortages in key sectors.

Employers will need to track and manage both different salary thresholds and different percentages for the ruling depending on when an employee first qualified. This will be especially important for employees that fall under transition rules. Fragomen can help with tracking and monitoring impacted employees.

Employees holding the ruling or seeking to apply for the 30% ruling in the near future should make sure to liaise closely with their employer to remain compliant.

• Recent changes. As of January 1, 2024, restrictions on the preferential tax treatment went into effect, with the amount of preferential tax treatment to be reduced sequentially over the five-year period – from 30% in the initial period of residence, to 20% in the interim portion, and then down to 10% in the final period of residence.
• Business concerns. Due to concerns raised by businesses and other stakeholders that it would be more difficult to attract talent to the Netherlands if this rule went into effect, the Ministry of Finance commissioned a study to understand the exact impact and to explore alternative solutions that would have a less damaging impact on the Dutch economy.

We are monitoring related developments and publish an alert when indexed thresholds for 2025 are announced.