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

The abolition of the partial foreign tax liability as of 1 January 2025 may have significant consequences for expats in the Netherlands and may also raise questions for employers supporting internationally mobile employees. Have you already informed your employees who benefit from the Expat Scheme (formerly known as the 30% ruling)?

Expat Scheme

The Expat Scheme 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 non resident tax liability. The partial non resident tax liability resulted in an exemption from taxation on income from savings and investments (Box 3), such as rental income (outside of the Netherlands), 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 originally introduced to make the Netherlands more attractive to international talent by offering tax benefits to expats. As of 2025, employees who benefit from the Expat Scheme can no longer choose to be treated as partial non resident taxpayers for Box 2 and Box 3, which 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 broader changes to the Dutch tax system, aimed at simplifying and standardising the rules.

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.

For example, employees with worldwide savings accounts, investments or overseas real estate may face additional reporting obligations and potential Dutch taxation in Box 3. 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 benefiting from the Expat Scheme in December 2023 may qualify for transitional rules. This means they can still use the partial non resident tax liability until the end of 2026.

The transitional rules provide 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 employees who benefit from the Expat Scheme, so they can prepare for the elimination of the partial foreign tax liability status and the financial consequences this may have.

In some cases, employees on international assignments or secondments within a group of companies may be eligible for compensation by the employer under an applicable international assignment policy. In other cases, the personal income tax return may become more complex and employees may require professional assistance. As such, there could also be consequences for the employer.

How can Exterus support you as an employer?

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

We offer two accessible options that you can deploy, depending on your organisation and employee population. Both options can be implemented quickly and tailored to your employee population:

1. Information and awareness session for employees
A practical presentation in which we explain to your employees:

• what will change as of 2025;

• how this may affect their personal situation;

• which choices and points of attention apply when filing the personal income tax return.

2. Personal income tax return services
If desired, we can, via you as the employer, offer your employees a collective arrangement for the preparation of their personal income tax return, with a tiered fee depending on the number of participants. This provides clarity, quality and often also a cost advantage for your employees.

Why act now?

By informing employees in a timely manner, you can prevent uncertainty during the 2025 personal income tax return season and demonstrate that you actively support them in dealing with changing regulations. This aligns with good employment practices and effective compliance management. To support this communication, you can download an informative flyer that can be shared directly with your employees:

Would you like to discuss what would be appropriate in your situation, or jointly explore which option best fits your organisation? Please feel free to contact us. We are happy to think along with you.

Are your employees who benefit from the Expat Scheme fully prepared for the 2025 changes?