Navigating the Changes in the Netherlands’ 30% Ruling with Nino Nelissen, Managing Director of EMG

In this blog post, we feature an interview with Nino Nelissen, Managing Director of Executive Mobility Group (EMG). Nino shares his expert insights on the Netherlands’ 30% ruling, discussing its development and the significant recent changes. With extensive experience in expat tax matters, he examines the potential effects of these amendments on attracting international talent and maintaining the Netherlands’ status as an expat-friendly destination.

Can you start by explaining what the 30% ruling is and its primary purpose in the Dutch tax system?

The 30% ruling is an important component of the Dutch tax system that has a long history in the nation, dating back to the post-World War II reconstruction years. The nation’s historically high tax rates made it difficult to recruit foreign labor. This was effectively handled by the 30% ruling, which increased the Netherlands’ appeal as a destination for talent from around the world.

What are the recent changes made to the 30% ruling? And what are the reasons behind these changes?

Recently, the 30% ruling has undergone significant changes, largely influenced by political perspectives that often underestimate its importance. Notably, these changes include a phased reduction in benefits: initially 30% for the first 20 months, then decreasing to 20% for the next 20 months, and finally 10% for the last 10 months. Additionally, the option for partial non-resident status has been eliminated. The primary rationale behind these changes is attributed to the Dutch housing market crisis. It’s argued that higher-earning internationals exacerbate the housing shortage by affording more expensive homes. However, this perspective overlooks the fact that internationals, particularly newcomers, are often compelled to seek housing in pricier segments, not by choice but by necessity. The real issue at hand is the widespread shortage across all housing segments, from social to executive. The solution lies not in reducing benefits but in expanding the housing supply.

In your view, how might these changes affect the Netherlands’ ability to attract international talent?

The Netherlands offers numerous advantages for internationals, including a minimal language barrier, an international focus, and a well-established community of internationals, facilitating easier adjustment. In my 30 years as an expat tax professional, I’ve observed the critical role of the 30% ruling. It’s rare to encounter individuals who weren’t aware of this benefit before accepting a job in the Netherlands. This ruling has even inspired similar tax breaks in neighboring countries. However, making it less attractive could lead to a decrease in international talent arriving in the Netherlands. While this may slightly ease the housing demand, it also means losing out on the diverse skills and economic contributions that these highly qualified professionals bring to our businesses and communities.

How do these changes impact individuals currently benefiting from the 30% ruling? And what advice would you give to those who might be affected?

Fortunately, individuals currently benefiting from the 30% ruling in won’t be impacted by the recent reduction in benefits. This provides some relief. Additionally, the abolishment of the partial nonresident tax status for this group will be delayed, not taking effect until January 1, 2027, instead of the initially planned January 1, 2025. So, for those already on the payroll in 2023, the adverse effects are relatively moderate. However, it’s the future employees who will face more significant challenges due to these changes.

What should employers do in response to these changes?

Employers should avoid attempting to reimburse the shortfall from the changes in the 30% ruling, as this could lead to unintended discrimination. Instead, they need to adopt a more personalized approach when determining compensation packages. While tax planning can potentially offer more benefits than the 2023 version of the 30% ruling, it requires tailoring compensation packages to each individual. This approach, while advantageous from a tax perspective, can be quite challenging for HR and payroll managers to implement. We are prepared to assist in this planning, but it’s important to acknowledge that what might be ideal from a tax lawyer’s viewpoint could present significant complexities in HR and payroll management.

Are there any alternatives or compensatory measures available for those who might lose out due to the amended ruling?

Yes, there are, but these involve highly individualized planning.

Finally, how is EMG positioned to assist individuals and companies navigate these changes?

At EMG, our team is well-prepared to assist both individuals and companies in navigating these changes. We’ve engaged in extensive creative thinking to develop strategies that are compliant with tax, immigration law, and employment law. We’re excited about the opportunity to deliver optimal results for our clients!

What specific services or support can EMG offer to those affected by the amended 30% ruling?

EMG is equipped to provide tailored solutions to those impacted by the revised 30% ruling. Recognizing that a one-size-fits-all approach is not feasible, we focus on individualized strategies that offer a clear path forward for each unique situation.

EMG, your partner in Global Mobility

Do you have questions about hiring international talent, payroll services, or recognized sponsorship? Please feel free to contact our experts, and we will gladly discuss the boundless possibilities.