30% ruling is compensation for extra costs
The 30% ruling gives the possibility to reimburse a maximum of 30 percent of the wages tax-free to employees from abroad who work in the Netherlands. It is a compensation for extra costs to be able to work in the Netherlands, such as travel costs to the home country, costs for (double) housing, storage and livelihood.
The scheme is intended to attract employees from abroad with specific expertise that is not or scarcely available in the Netherlands. Our Supreme Court has in the recent past ruled that this is not a matter of favouring these expats but a real reimbursement of costs.
The duration shortening to 5 years should grandfather existing 30% rulings
Up to now, the multiple austerity measures of this scheme (for example the duration shortening from 10 to 8 years in 2012) have, as it should be, respected existing cases.
Each person eligible for the 30% ruling receives a ruling from our government with an explicit end date mentioned therein. Example; if an expat was employed here as of January 1, 2014 his / her decision will that the scheme applies as from 1 January 2014 through 31 December 2021. With this Bill for all these expats the agreement with the tax authorities is shortened to January 1, 2019 unilaterally ! This means a ‘sudden death’ of the ruling for all existing 30% ruling holders who have enjoyed the ruling for 5 years or longer on aforementioned date.
Is that legally possible? Perhaps: in the fine print of every ruling it is stated that this ruling has been issued "subject to changes in legislation and regulations".
However, in our opinion this legislation contains de facto retroactive-effect. An incoming employee in 2014 who has planned his/her career based on a duration of eight years, should be able to trust that the Dutch government will not decrease the duration of the ruling to 5 years effectively as from 2014.
On 8 October 1996, the Ministry of Finance listed the reasons when retroactive tax legislation may be enacted. None of these criteria - such as tax abuse – are met in this idiotic measure (as a result of which many well-earning expats will leave early and pay their taxes and 21% VAT 3 years shorter than the Netherlands promised in its rulings to these people).
This kind of unfair legislation cannot be expected from a fair government, even if the expats do not have voting rights for our Dutch government and thus are easy targets. And it may certainly not be expected from a government that wants to bring operating businesses (“smoking chimneys”) to the Netherlands instead of flow-through letterbox companies. Informal inquiries among VVD MPs (our biggest party in the government) show that we probably do not have to expect anything from our parliament, they will rubber stamp this Bill, hopefully the Council of State will advise against this measure. We also kindly request all expats of multinationals to mobilise their employers to lobby against this horrendous Bill.
Migrantic, tax & immigration lawyers (www.migrantic.com) is a full service legal firm for (employers of) expats, multinationals, companies and private clients. For any migration related legal questions please contact our firm. We provide legal advice on immigration and tax (including immigration- and tax compliance) for:
- internationals/‘expatriates’ and (international) private clients
- companies with cross-border activities
Do you want to know what the consequences are of the changes in the 30% regulation in your situation? Or do you want a free calculation of how much tax is due after the 30% ruling? Please contact us.