The 30%-ruling restored and introduction of the 27%-ruling?
As we already explained in detail in our previous articles, the Dutch government confirmed on Prince Day yesterday that the 2023 changes to 30%-ruling will be reversed by cancelling the so-called 30/20/10 rule. But that in no-way meant that we could simply lay back and just admire the parade of headdresses and fascinators. Because even though the 30/20/10-rule was cancelled, there are still some changes that call to action.
30/20/10-rule reversed
First of all, the plan indicates that the implemented 30/20/10-rule will be largely reversed. For most HR-and payroll professionals like yourself, this should bring relief as implementing and tracking these percentages through the subsequent periods greatly impacted your payroll administration and compensation planning. However, the use of the word ‘largely’ seems to indicate that there may be some situations where the effects of implementing the 30/20/10-rule cannot be reversed. The specific and formal details of how the 30/20/10-rule will be reversed are still to be published but we expect that the limitations will be on the payroll administrative side of implementing the reversal. These details will therefore be of special interest to your payroll administrators. We will provide a more in-depth analyses when the formal details are published.
New 27%-rule
The new plans also confirmed that the maximum tax-free allowance of 30% will be reduced to a maximum 27% tax-free allowance. The lowered 27% will be implemented starting January 1st, 2027[!]. For the years 2025 and 2026 the maximum allowed tax-free percentage of 30% can still be applied.
Given the relatively small drop from 30% to 27% and the delayed implementation of the lower percentage, we expect that this change will have a minimum effect on your expat population or your payroll and compensation policy.
Transitional law
For expats who already benefited from the 30%-ruling before January 1, 2024 there will be a transition-rule which will exempt them from the lowered 27% percentage.
New minimum salary for the 30%-rule in 2025
As you know, to be eligible for the 30%-ruling your expat population must meet the minimum annual(ized) salary requirement. This minimum salary requirement is not only relevant when applying for the 30%-ruling, but is a continued requirement for the duration of the grant. If the taxable salary falls below this minimum level in any given year, this may result in the loss of the 30%-ruling with retroactive effect to the first day of that year. These situations often occur when the expats works parttime or takes unpaid leave. If this situation occurs, a lower tax-free percentage will need to be implemented in the payroll calculation to meet the minimum salary requirement (see examples 1 and 2 in the section below).
This minimum salary is indexed every year to reflect the increased price index. This increased price index however is not always matched to the average salary increase. From 2023 to 2024 we saw the minimum salary for the 30%-ruling increase by 9,9% from EUR 41.954 tot EUR 46.107 (and from EUR 31,891 to €35.048 for the so-called young masters population). This nearly double digit increase prompted additional budget allocations to the compensation and recruitments budgets for many companies in order to keep their expat population compliant to the 30%-ruling requirements.
For 2024 to 2025 the indexation is 1,2% moving the minimum income for the 30%-ruling from EUR 46.107 to EUR 46.660 and from EUR 35.048 to EUR 35.468 for the young masters. This minor increase should allow the salaries to grow at a more steady pace and still stay above the minimum salary requirements for the 30%-ruling.
New minimum salary for the 30%-rule in 2027
The cabinet plans does clarify that in addition to the 3% reduction of the maximum allowed tax free allowance, there will be an additional 9,4% increase of the minimum income for the 30%-ruling from 2026 to 2027. This 9,4% increased will be on top of the annual indexation. This additional 9,4% increase will only apply to employees who obtained their 30%-ruling on or after January 1, 2024. For employees that already benefitted from the 30%-ruling on January 1, 2024 the indexed minimum salary will continue to apply (so without the 9,4% correction).
This increase and differentiation between the expat populations will mean extra diligence from your payroll department in 2027 to assure that your employees continue to meet the requirements for 30%-ruling.
More importantly, you can already start anticipating the need for an increased compensation budget to assure that your expat current population can (continue to) fully benefit from the 30%-ruling. This will also drive your recruitment budgets if the minimum income requirements for the 30%-ruling and the ruling itself is used as a benchmark to determine the attractiveness of accepting the position.
HR-services
We have a team of specialists with respect to payroll, HR and international tax mobility. Together, our team of specialists can not only assist you and your HR-Team and payroll by providing the metrices needed to plan and anticipate these budget needs, but also provide hands-on guidance and assistance. and be a sparring partner. Contact Jahir Dijks to find out more.
