Gradual reduction of the 30% benefit
The most substantial change is the gradual reduction of the 30% benefit. During the five-year period in which employees are normally entitled to the 30%-facility, the maximum tax-free reimbursement that can be provided, will be gradually reduced from 30% of the employee’s Dutch gross wages (capped at EUR 233,000 for 2024) to 10% of the employee’s Dutch gross wages (again capped at EUR 233,000 for 2024). This works out as follows:
- First 20 months: during the initial 20 months of the five-year term, employees will still be able to receive 30% of their Dutch gross wages tax-free. Taking into account the aforementioned cap, the maximum tax-free reimbursement will therefore be EUR 69,900.
- Next 20 months: during the subsequent 20 months, this percentage will decrease to 20%. Taking into account the cap, the maximum tax-free reimbursement will therefore be EUR 46,600.
- Final 20 months: during the final 20 months, the tax-free reimbursement will be reduced even further to 10%. Taking into account the cap, the maximum tax-free reimbursement will then be EUR 23,300.
Please note that a transitional arrangement applies, on the basis of which employees can apply the 30%-facility the same way as it is under the current rules, provided the 30% facility was already lawfully applied on their wages in the final salary period of 2023.
Abolition of the partial non-resident taxpayer status
Under the current rules, employees who qualify for the 30%-facility may choose to be treated as partial non-resident taxpayers. If this election is made, such employees will continue to be regarded as domestic (Dutch-resident) taxpayers for Box I (income from work and residence), meaning that they will remain entitled to the typical Box I deductions such as mortgage interest, annuities, etcetera.
However, for Box II (income from a substantial interest, i.e., 5% or more of any class of shares) and Box III (deemed income from savings and investments), they will only be taxed in The Netherlands on any Dutch source income. For Box II, this means income (e.g., dividends and capital gains) from a substantial interest in a Dutch company. For Box III, they are only taxable for property in The Netherlands, while other income (e.g., assets outside The Netherlands, interest from bank accounts and capital gains) is not taxable in The Netherlands.
This partial non-resident taxpayer status will however be abolished as of 1 January 2025.
Please note that a transitional arrangement applies, on the basis of which employees can apply for the partial non-resident taxpayer status the same way as it is under the current rules up until 31 December 2026, provided the 30% facility was already lawfully applied on their wages in the final salary period of 2023.
Next steps/Recommended actions
Key client takeaways
It may be advisable for your organization to review these developments carefully, since they may have a significant impact on the wage and income tax position of your employees. I.a. the following courses of action may be considered going forward:
- In case employees’ actual extraterritorial expenses (as defined in Dutch wage tax law) exceed the capped amount of the 30% facility, it can be preferable to reimburse those costs free of tax instead of the 30% amount. Such a choice must be made annually through the payroll. This makes it advisable to review employee compensation packages for tax optimization opportunities.
- Your organization may be able to facilitate the applicability of the transitional rules for its (new) employees who are coming to The Netherlands in the remainder of the 2023 calendar year (and who are eligible for the 30%-facility), by ensuring the facility is already applied in the payroll before 31 December 2023.
- In case an employee who already has been granted the 30-% facility changes employers, a new 30% facility request has to be filed with the Dutch tax authorities. It is not certain yet whether the new rules will then immediately apply to the new 30%-facility grant, or whether the transitional rules can be invoked in such case. For employees considering a change of employers, this may be an important aspect to keep in mind.
Please feel free to contact the authors of this client alert, if you require any assistance in this respect.