The abolition of partial foreign tax liability, are your employees already aware?

The abolition of the partial foreign tax liability in 2025 may have significant consequences for expats in the Netherlands and their tax position. Have you already informed your employees with a 30% ruling?

30% ruling

The 30% ruling is a tax benefit for expats moving to the Netherlands for work. This allows them to receive 30% of their gross salary tax-free, to cover costs incurred when moving to and staying in the Netherlands. One of the benefits of this arrangement was the option to use the partial foreign tax liability. The partial foreign tax liability resulted in an exemption from taxation on income from savings and investments (Box 3), such as rental income, interest, dividends, and income from qualifying interest in a company established outside the Netherlands (Box 2), such as dividends.

However, as of 1 January 2025 the partial foreign tax liability status has been abolished. The partial foreign tax liability was once created to make the Netherlands more attractive to international talent by offering tax benefits to expats. Now as of 2025, expats who have a 30% ruling can no longer choose to be treated as partial foreign taxpayers for box 2 and box 3 and this may have significant consequences for their tax position.

Why is the partial foreign tax liability being abolished?

The Dutch government has decided to abolish the partial foreign tax liability as part of a broader reform of the tax system. The purpose of this reform is to make the tax system fairer and more transparent.

Consequences for employees

For employees living in the Netherlands who used the partial foreign tax liability status, the tax benefits will disappear. This may result in higher tax assessments, depending on their specific financial situation.

In addition, the abolition may affect their net income and their ability to exclude certain foreign income from Dutch taxation.

Transitional law

Expats who were already using the 30% rule in December 2023 are eligible for a transitional right. This means they can still use the partial foreign tax liability until the end of 2026.

The transitional law provides temporary relief, but it is important to understand that this is only a temporary measure. Expats should plan for the period after 2026, when they will be fully subject to the new rules.

How do you prepare employees?

It is essential to inform your employees with a 30% ruling, so they can prepare themselves for the elimination of the partial foreign tax liability status and the financial consequences this may have for them. Possibly employees who are on a secondment within a group of companies are eligible for a compensation by the employer under an applicable international assignment policy, or their tax return becomes more difficult and they will require professional assistance. As such there could also be consequences for the employer.

At Exterus, we understand that tax changes can be complex and far-reaching. That's why we offer comprehensive advice and support to help you navigate these changes.

Our experts are ready to guide you in restructuring the tax position. Contact us for a consultation and find out how we can support you through this transition.

Are your employees with 30% benefits already up-to-date?