The 150 km distance requirement in the 30%-ruling doesn’t lead to a clear overcompensation according to the Advocate General

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Source: Conclusion Advocate General, Supreme Court 29 September 2015

Based on the 30% ruling an employer can pay a tax free compensation of maximum 30% of the (taxable) wage to an employee who is recruited from abroad and who has specific skills and experience which are scarce on the Dutch labour market. To prevent unwanted use of the ruling the regulations have been tightened as of 1 January 2012. Since 1 January 2012 the condition is introduced that an employee only qualifies for the 30% ruling if he was residing at a distance of more than 150 kilometres from the border of the Netherlands during more than two-thirds of the 24-month period preceding the commencement of the employment in the Netherlands.

The present case handles about C.G. Sopora who worked in 2012 in the Netherlands for a Dutch employer. The last two years before he began to work in the Netherlands, he lived in Germany, albeit at less than 150 kilometers from the Dutch border. The tax authorities refused the 30% ruling in his case.

Sopora filed an appeal with the position that the refusal to grant the 30% ruling violates European Union law. Since the answer to that question was uncertain, the Dutch Supreme Court (No. 12/05577, ECLI: NL: HR: 2013:474) requested a preliminary ruling from the European Court of Justice (hereinafter: the EU Court). The EU Court considered that the current regime is, in principle, not contrary to EU law (No. C-512/13, ECLI: EU: C:2015:108).

The mere fact that in the 30% ruling limits are created for the distance with respect to the place of residence of employees and the amount of the tax exemption, is in itself not discriminatory or contrary to the free movement of workers. This is according to the EU Court different however, when the use of the 30% ruling results in a clear systematic overcompensation of the actual extra territorial costs. A national tax court must verify this, according to the Court.

Following the judgment of the EU Court Advocat General Niessen has made an additional conclusion. The Advocate General is the highest advisor of the Supreme Court. He gives his opinion about what the Supreme Court should decide. Based on research the Advocate General concludes that the 30% ruling doesn’t systematically and clearly lead to overcompensation. The conclusion is that the appeal in cassation by Mr Sopora should be declared unfounded by the Supreme Court. This would mean that the 150 km distance requirement is acceptable and not contrary to EU law.