The government's plans to introduce a 30% ruling limit became known on the eve of Prince's Day, we talked about this in our article. Now, the Payroll Tax Fact Sheet provides specific guidance and examples of accruals in light of changes from 2023 to 2026.
What is 30% ruling?
As a reminder, a Dutch employer can use a convenient way to reimburse a highly qualified employee for travel expenses (extraterritoriale kosten) to work in the Netherlands. Instead of compensating for actual expenses incurred (for air travel, transportation of things, and so on), the employer can request a 30% ruling for an employee - a tax rebate that allows you to exempt 30% of your gross salary from taxation. Read more about the 30% ruling and the conditions for obtaining it in our review. And we will focus on change.
Annual selection rule
Now the employer makes a choice in favor of 30% ruling once by sending a request to the tax service. If the tax authority makes a positive decision, then the specialist uses steering for five years. Starting in 2023, the employer will have to choose each year between ruling and reimbursement of actual expenses. Most likely, with the help of the appropriate checkmark in the salary form. This choice must be made before the calculation of the first salary of the year, and then this decision is valid throughout the calendar year. After the 5-year period, the extraterritoriale kosten are, as a rule, no longer exempt from taxation.
When should you make a choice? The moment of selection depends on the date of submission of the application for ruling. Like us wrote earlier, the tax ruling decision may be retroactive, but only if the retrospective period does not exceed 4 months (that is, if the application is submitted within 4 months after employment). If the application is submitted after 4 months, the discount takes effect from the first day of the month following the month in which the application was submitted.
Example 1.
The new employee starts work on July 1, 2023.
- Option 1
You can apply for the 30% ruling until October 1, 2023. Since you submit this application within 4 months, the resulting tax decision will be considered effective from July 1, 2023. Within 4 months from July 1, 2023, i.e. through October 31, 2023, you can choose whether you will apply the 30% ruling or refund the actual costs. As of November 1, the choice should already be made and will be valid until the end of 2023.
- Option 2
You apply 4 months after the new employee is hired. After you make your tax decision, you make your choice for the remainder of the calendar year. You must then make your selection on January 1, 2024 each year.
Example 2.
The employee starts working in the company from February 1, 2023. You apply for 30% ruling on June 15, 2023. Since the application is not submitted within 4 months after employment, the ruling on the application of ruling comes into force from July 1, 2023 (not retroactively). Until July 1, 2023, you can only reimburse actual expenses without paying taxes. As of July 1, 2023, you must choose whether to apply the 30% credit or continue to pay actual costs. This choice will be valid until the end of 2023. From January 1, 2024, you must choose again.
Amount limit 30% of the ruling
From 2024 (and for some categories of employees - from 2026), an upper annual salary threshold is introduced, to which a 30% ruling can be applied. We are talking about the “Balkenende standard” (2022 euros in 216.000). The "Balkenende Standard" (Balkenendenorm) is the upper salary limit in the Netherlands, which is correlated with the prime minister's salary. This amount is indexed annually, so for 2024 it is not yet known.
If we assume that in 2024 this amount will be 220.000 euros, then this means that the maximum base on which you can request a ruling will be €220.000. The tax-free limit will be 30% of 220.000 euros, i.e. 66.000 euros. These amounts are on an annual basis. If an employee arrives in the Netherlands in the middle of the year, the calculations must be adjusted depending on the time of his arrival.
Example 3.
The employee arrives in the Netherlands on 15 June 2024. In June 2024, there are still 10 working days left. His salary is 150.000 euros from June 15 to December 31, 2024. Ruling is calculated as follows:
- Step 1
30% of actual salary at 150.000 euros = 45.000 euros.
- Step 2
30% of the standard at 220.000 euros per year = 66.000 euros.
- Step 3
It is necessary to determine whether the annual salary exceeds the amount of the “Balkenende standard”. €150.000 - salary for a period of 10 working days in June + 6 months. You calculate the number of working days per month - 65/3. You define a year as 260 business days. The amount of 150.000 euros refers to 10 + 6 x 65/3 days = 140 days. Further 260/140 x 150.000 euros = approximately 280.000 euros. This is more than the maximum limit of 220.000 euros.
- Step 4
You use the odds 140/260 on the amount of 66.000 euros. As a result, it comes out to about 35.500 euros, and this is the maximum amount of 30% of the ruling.
Example 4.
As of July 1, 2022, the employee has a valid 30% ruling for a period of 5 years (i.e. until June 30, 2027). His annual salary is 500.000 euros. You apply a 30% ruling to his monthly salary for December 2022. You can secure a tax-free refund of 150.000 euros per year up to and including 2025 (30% of 500.000 euros). And only from January 1, 2026, you should focus on limiting the amount of ruling. For example, for €224.000 it would be €67.200.
The use of 30% ruling traditionally raises many questions. In order not to make a mistake in anything and not to miss profitable opportunities, use the help of Nalog.nl specialists. We can offer you:
1) consultation;
2) ruling request.
