From 30%-ruling to 10%-ruling

The 30%-ruling is a tax facility for foreign employees with specific expertise working in the Netherlands. Under this scheme, employers can apply an exemption of up to 30% of the salary of employees meeting the conditions of the 30%-ruling as a reimbursement of extraterritorial expenses on a notional basis. The 30%-ruling has a maximum duration of 5 years.

Pursuant to the amendment, from 1 January 2024 the 30% tax-free allowance will only be provided in the first 20 months of the term. In the following 20 months, the maximum tax-free allowance will be 20% of the salary and in the last 20 months of the term, this percentage will drop to 10%. For a 30%-ruling with a term shorter than five years, the same percentages and periods apply.

The adopted amendment provides for a transitional arrangement for employees who, in the last period of 2023, received compensation for which they had a 30%-ruling. The scaling back therefore does not apply to employees who use the 30%-ruling before 1 January 2024. If an employee again qualifies as an incoming employee after an interruption, this transitional rule will no longer apply.

Capping 30%-ruling

The Tax Plan 2023 regulates that the tax-free compensation that can be paid based on the 30%-ruling will be capped. This capping will take effect from 1 January 2024. From then on, employers can pay a maximum of 30% of income up to the Balkenende norm tax-free. For 2024, the Balkenende norm is EUR 233,000. This means that the maximum base over which the 30%-ruling can be applied is an amount of EUR 233,000 and thus an employer can give a maximum of EUR 69,900 tax-free compensation.

The capping (which enters into force on 1 January 2024) applies to employees using the 30%-ruling from 1 January 2023. There is a transitional rule for employees on whose wages the 30%-ruling was applied in December 2022. For this group, the capping does not apply from 1 January 2024, but from 1 January 2026.

Effect of capping in payroll

Most employers pay their employees on a monthly or four-weekly basis. However, the maximum tax-free compensation under the 30%-ruling from 1 January 2024 is set at 30% of the Balkenende norm per year. This raises the question of how the capping should be incorporated into the periodic payroll. The Dutch Tax Authorities published a position paper last week, which seems to give some freedom to either make use of the exemption until the maximum is reached or spread the exemption evenly over the months in the year.

Both methods have their own advantages and disadvantages. Under circumstances, the need for recalculation and corrections may arise in payroll. The addendum to the employment contract should provide for this.

Abolish partial foreign taxpayer status

Currently, employees who are residents of the Netherlands and use the 30%-ruling can opt for partial foreign taxpayer status in their income tax return. This means that for purposes of Box 2 and Box 3, they are considered foreign taxpayers despite being resident in the Netherlands. The idea behind this arrangement is to ensure that the Dutch tax system does not form a disincentive for highly skilled workers to come and work in the Netherlands.

While this may be relevant for employees from all countries, it has particular relevance for US employees given the concurrence between the domestic partial foreign taxpayer status and the application of the tax treaty between the Netherlands and the United States.

The amendment provides that the partial foreign taxpayer status will be abolished from 1 January 2025. However, this amendment is also subject to a transitional rule. Employees who make use of the partial foreign taxpayer status in the last period of 2023 will still be able to make use of this tax scheme until 31 December 2026 at the latest, based on the transitional rule.

What are the implications for your organization?

Since 1 January 2023, employers have to choose annually whether to make use of the 30%-ruling or reimburse the actual extraterritorial costs ('ET costs'). However, the employer must be able to prove these actual ET costs and keep track of them in the payroll per employee. Due to the scaling back of the 30%-ruling, it is recommended to assess which of the two options is the most favorable. If the actual ET costs incurred are higher than the tax-free reimbursement based on the scaled-down 30% to 10%-ruling, the choice can be made - per calendar year - to allow reimbursement based on actual ET costs incurred.

In addition, the adopted scaling back of the 30%-ruling whereby it will be phased down to a 10%-ruling will also possibly increase the administrative burden. For each employee using a 30%-ruling, the percentage of the exemption will have to be changed every 20 months. This change will also have to be implemented in the payroll system. 

If you have employees with a salary that exceeds the Balkenende norm, the capping measure will result in the amount that can be paid tax-free being reduced. We recommend checking whether the additional tax burden will be borne by the employer or employee under the agreements with the employee. Depending on the circumstances, you may need to make new agreements regarding this issue with the employee concerned and record these arrangements in the addendum to the employment contract.

You may also need to agree on how to deal with the application of the exemption in payroll or how revision will take place if the 30%-ruling ends during the year.

In any case, we recommend that you inform the employee of the changes and their consequences for the employee.


The Tax Plan 2024, including the amendments, is yet to be adopted by the Senate. If the Senate agrees in December, these changes could have huge consequences for certain employees.

After reading this news item, do you need further clarification on the potential consequences? Or are you interested in a no-obligation consultation? If so, please contact your Loyens & Loeff adviser or one of our tax advisers from our Employment & Benefits team. We will be happy to assist you.