Employees recruited from abroad are eligible for the 30% ruling, provided that certain conditions are met. The ruling allows them to receive 30% of their salary untaxed for a period of up to five years.

The Dutch Government proposes to cap the salary to which the 30% ruling can apply at EUR 216,000 as per 1 January 2024. The salary cap will increase as per 2024. Any salary in surplus of the cap will be fully taxed. The above means that employees applying for the 30% ruling can receive a maximum of EUR 64,800 untaxed (up to 2024, as per 2024 this amount will be higher due to increase of the cap). In case the actual extraterritorial expenses are higher than 30% of their (capped) salary, one can opt to have these expenses reimbursed without taxation.

A few remarks with respect to the proposed salary cap:

• As soon as the salary cap is introduced, the employer and employee should make a choice between the application of the 30% ruling or the reimbursement of actual costs. This choice should be made every year and applies to the whole calendar year.
• For 30% rulings which are currently applied, grandfathering rules are proposed up to 1 January 2026, meaning that their salary is only capped as per 1 January 2026.
• Reimbursement of tuition fees for the international school should remain to be exempt from taxation even if the 30% ruling is applied.

Our view

The proposed salary cap in the 30% ruling may be an incentive for a potential candidate to start the employment this year as the candidate can benefit from the grandfathering rules. Starting in 2023 results in the salary cap being applicable.

This measure will increase the administrative burden for the employer, as each year the choice must be recorded whether to apply the 30% ruling or to reimburse the actual extraterritorial expenses.