The 30% ruling has long been a cornerstone of the Dutch tax system, providing significant financial benefits for highly skilled workers relocating to the Netherlands. By allowing up to 30% of an expat’s gross income to be tax-free, this measure helps professionals offset the costs of moving to a new country while supporting businesses in attracting top international talent.
However, changes are on the horizon that could reshape this well-known incentive.
Starting in 2027, the tax-free allowance will be reduced from 30% to 27%, a seemingly minor adjustment that can still have notable implications for expatriates and the companies that employ them.
Staying informed about these upcoming changes is crucial for planning your financial future in the Netherlands, so keep reading the article to learn more.
What is the 30% ruling?
The 30% ruling is a tax advantage available to highly skilled workers who relocate to the Netherlands. It was designed to make the country more attractive to international talent by reducing the tax burden on qualified professionals.
Under the current policy, expats who meet specific criteria—such as earning a minimum income threshold, having advanced educational qualifications, or filling a role that the local workforce cannot easily satisfy—can have up to 30% of their gross salary exempt from Dutch income tax.
For many expats, this ruling serves as a financial buffer, helping them manage the higher cost of living in the Netherlands and offering a degree of stability while they settle into their new home.
Changes to the 30% ruling starting in 2027
From 2027 onward, the 30% ruling’s tax-free allowance, currently at 30% of gross income, will be lowered to 27%. This means a smaller portion of an eligible expat’s earnings will be exempt from Dutch income tax, potentially reducing their overall take-home pay. While a 3% decrease may seem modest, it can have a meaningful financial impact, especially for higher-income individuals.
It’s important to note that this change will only apply to employees who start working in the Netherlands on or after 1 January 2024. Those already hired before this date will not be affected and will continue to benefit from the full 30% exemption throughout their five-year eligibility period. This grandfathering provision gives current beneficiaries stability and predictability while ensuring newcomers are prepared for the adjusted allowance.
The Dutch government has explained that this reduction is intended to balance maintaining the country’s appeal to international talent and ensuring equitable tax policies for all taxpayers. By adjusting the tax-free percentage, policymakers aim to align these expat-focused benefits more closely with the broader national fiscal strategy.
As a result, companies hiring in the Netherlands need to consider how the upcoming changes may affect their employees’ overall compensation packages, while individuals planning a move should carefully review their post-2027 financial scenarios.
Impact on expats
The 3% reduction in the tax-free allowance may not seem substantial, but it can lead to a noticeable decrease in take-home pay for high-income earners. Expats planning to relocate after January 2024 should carefully consider the timing of their move, as the date of employment will determine whether they qualify for the full 30% exemption or the reduced 27%.
This reduction could also prompt many professionals to reassess their budgets. Housing, often a significant expense in the Netherlands, may need a second look. Costs related to international schooling, healthcare, and daily living expenses could also require adjustment. Being proactive about these changes will help expats maintain their financial stability.
Strategies for expats to mitigate the impact
To offset the reduced tax benefit, expats can take several steps. Budgeting adjustments are a good starting point—factoring in the smaller tax-free portion early can help avoid unexpected financial strain.
Another option is to work with employers to negotiate salary increases or additional benefits to help maintain a comfortable standard of living. Some employers may be open to offering relocation bonuses, housing allowances, or other perks to bridge the gap left by the reduced tax-free allowance.
Finally, long-term residency considerations may come into play. For expats planning to stay in the Netherlands beyond their eligibility for the 30% ruling, it’s worth exploring other financial advantages of living and working there, such as access to Dutch social security benefits or retirement planning options.
What can a Dutch Employer of Record do for you?
Working with a Dutch Employer of Record (EOR) can make learning about the changing 30% tax ruling in the Netherlands far less daunting. An EOR is equipped with local expertise and a deep understanding of Dutch labor laws and tax regulations, providing invaluable guidance as these new rules come into effect.
By partnering with an EOR, companies can ensure they remain compliant and well-prepared, saving time and reducing the risk of errors that could lead to financial penalties or administrative hurdles.
With the 30% tax ruling set to change in 2027, having an EOR on board means you’ll receive up-to-date information and proactive support in adapting to the new thresholds and timelines. This kind of partnership simplifies expatriate staff’s day-to-day management and enhances financial predictability and compliance certainty.
Additionally, EORs can guide employees through applying for or renewing their tax benefits, ensuring all required documentation is correct and submitted on time. For expats, this means less confusion over eligibility and a clearer understanding of how these changes will impact their income.
Stay ahead of the changes
The forthcoming changes to the 30% ruling represent a shift in how expats will approach their financial planning in the Netherlands. Although the reduction from 30% to 27% may seem modest, it’s essential to understand how this adjustment could affect your take-home pay and overall budget.
For those planning to move or hire internationally, timing is critical—employment start dates will play a significant role in determining the level of tax benefit. Preparing well in advance and considering the broader implications can make the transition smoother and help you stay ahead of these changes.
If you’re seeking support, guidance, or just a reliable partner to guide the evolving Dutch tax rules, consider working with an Employer of Record. Get in touch so our expertise can help ensure a seamless move, whether you’re an expat or a business looking to bring talent into the Netherlands.