30% Ruling Update

Prinsjesdag (Budget Day) 2018

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The annual budget day, better known as Prinsjesdag, was held yesterday September 18, 2018 in The Hague. Leaders in the Netherlands meet every year to announce budget plans for the following year.

This year, the 30% ruling has been the topic of debate with details regarding the changes to come, kept under wraps. The 30% ruling is a tax facility in the Netherlands that allows an employee to receive up to 30% of their income, tax-free. In addition, the ruling implies the possibility to elect for a limited taxable basis, as well as for the possibility to have school fees reimbursed free of tax by an employer.

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Additionally, the budget contains the provision to reduce the maximum duration of the 30% ruling from 8 years to 5. As of now, there is no new information. It has become clear, however, how the 5 year period is calculated. The authorities do this by looking at the expiration date: rulings with an expiration date from January 1, 2019, and January 1, 2022, lose its validity on December 31, 2019. For rulings that have an end date after January 1, 2022, the maximum duration is reduced by 3 years.

There is, however, an unexpected twist as a transition ruing has been announced with respect to school fees paid in respect to international schools. Under this transition ruling, schools remain, in principle, eligible for tax-free reimbursement during the school year 2018-2019.

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