Changes 30% ruling adjusted by Lower House

Blog: November 18, 2011

30% ruling less adjusted, lower salary requirement.

On November 17 the Lower House voted about the proposed changes in the 30% ruling. As stated in previous postings I expressed my concerns about these changes. Good news is now that the biggest change, the salary requirement, is revised as such that much less expats will lose or will be excluded from the ruling.

What were the original proposed changes?

A minimum salary requirement of € 50,000 per year (excluding the 30% allowance) will be introduced. This means that the gross salary would be € 72,000. This requirement should replace the education and work experience check.
Incoming employees must have stayed outside the Netherlands in a period of 25 years before arrival in the Netherlands. This was 10 years.
Incoming employees must have lived more than 150 km from Dutch border before the work in the Netherlands commences.

In close contact with politics, together with expat centers and international businesses and through media exposure Expatax has repeatedly expressed our concerns about the consequences the changes could have for the Dutch economy. Especially the required minimum salary, in practice higher than the required salary for the knowledge migrant ruling, would exclude thousands of expats from the ruling, possibly leading to the consequence that international companies would leave the Netherlands. This could cause more economical damage than what would be saved with reducing the claim on the ruling.

Politicians were not deaf for our pleads. Amendments were proposed and some of them have been accepted. Lower House has voted and the following changes are approved.

Which changes have been approved by the Lower House?

The minimum salary will be adjusted in line with the knowledge migrant ruling. This means that the salary required will be reduced to € 35,000. Including the 30% allowance the gross salary should than be € 50,000. Scientists and researchers working at universities and knowledge organizations will be exempted from the salary requirement. For young masters below the age of 30 the salary requirement will be € 26,000.

To be able to financially support this adjustment the maximum term of the 30% ruling will be reduced from 10 to 8 years. This adjustment will only affect the new applications. Knowing that the 30% ruling was introduced to cover the extra territorial costs related to a temporary stay in the Netherlands this adjustment seems fair. Countries around us use an average maximum term of 6 years, so the Netherlands are still more generous.

The proposed changes concerning the 150 km distance from Dutch border and the increase in length of the stay outside the Netherlands from 10 to 25 years have been approved. Additional regulations are created to prevent abuse. I still have doubts about the distance requirement which could work out very unfair in specific situations, but that is something which must be worked out in the jurisdiction.

Additional comments have been made:

The text of the ruling will be adjusted as such that in case of change of employer it is relevant that an employment contract is signed within 3 months after the employee left the previous employer. Currently the ruling states that the work activities must be started within 3 months. The Supreme Court already ruled in the past that the idea behind the ruling is that a new job must be found within 3 months even though the work starts later than 3 months. So with this adjustment the text will be more in line with this decision from the Supreme Court.
The ruling should stop when the work activities end. Currently the ruling is also applicable on for example options which are paid out within the maximum term of 10 years but at a time when the employee already left the company. The Supreme Court is currently dealing with a similar case, we are waiting for the outcome.
Currently the ruling is guaranteed for the first 5 years of the employment contract. This will no longer be applicable from January 1, 2012 for new applications. From that date the ruling will be ended from the moment that the requirements are not met anymore.

Transitional regulation

As mentioned in previous blogs the changes will not immediately affect the current granted rulings. The security of the first 5 years period will remain applicable for rulings which are granted with a start date before January 1, 2012. So if an employee has the ruling already for more than 5 years on January 1, 2012 he will fall under the old rules as long as he doesn't change employer. If the period ends after January 1, 2012 the salary requirement becomes applicable and also the distance requirement. The changed requirement concerning the period of previous stay will only affect new applications.

Conclusion

So determine whether the current salary is high enough, whether the transitional regulation is applicable and what needs to be done with regards to employees who lived within 150 km of the Dutch border when the work in the Netherlands started less than 5 years ago.

The Upper House also has to vote about the changes, but I don't expect that anything further will change.

Still a lot to think about. Expatax can of course assist you. Expatax has extensive experience with the 30% ruling and assists many international companies with their payroll administration in the Netherlands. If you have any questions please check our Knowledge Base on www.expatax.nl/faq through which you can also contact me.

- Proposed changes of the 30% ruling per 1 January 2012 (Dutch)
- Reaction Expatax about the proposed changes of the 30% ruling (Dutch)
- Answers to questions about the proposed changes of the 30% ruling (English)