In depth

Salary cap

The amendments that have now been approved are in addition to the introduction of the 30% facility salary cap, which was announced and enacted into law last year. As of 1 January 2024, the 30% benefit is capped for salaries exceeding the maximum wages for the public sector (the so-called "WNT" norm of EUR 233,000 in 2024). Transitional rules are in place, as a result of which the cap only applies as of 1 January 2026, in case employees already benefitted from the 30% facility as per December 2022.

Gradual reduction of tax-free percentages

As of 1 January 2024, the maximum tax-free reimbursement that can be provided during the five-year period in which employees are normally entitled to the 30% facility, will be gradually reduced as follows:

• 30% of the employee's Dutch gross wages in the first 20 months (maximum tax-free reimbursement EUR 69,900 for 2024)
• 20% of the employee's Dutch gross wages in the second 20 months (maximum tax-free reimbursement EUR 46,600 for 2024)
• 10% of the employee's Dutch gross wages in the last 20 months (maximum tax-free reimbursement EUR 23,300 for 2024).

The same percentages and periods apply for 30% facility grants of which the duration is less than 60 months.

Employees who have a valid 30% facility grant and have applied the 30% facility during the final wage period of 2023 (i.e., normally December 2023), are eligible for certain transitional rules. Under these rules, the percentage may be continued at 30% for the remaining term of the grant. Should the 30% facility subsequently be terminated, the transitional rules cease to apply. This can only be different if the employee changes employers, and the period between the old and the new employer is less than three months.

Repeal of the partial non-resident taxpayer status

Currently, employees in The Netherlands who have been granted the 30% facility, can opt for the so-called partial non-resident taxpayer status. This status enables the employees (and their fiscal partners) to be treated as non-resident taxpayers, for the purposes of Box 2 (income from a substantial interest) and Box 3 (income from savings and investments), even if they reside in The Netherlands.

As of 1 January 2025, this status will be repealed. Employees who have a valid 30% facility grant and have applied the 30% facility during the final wage period of 2023 (i.e., normally December 2023), may retain the partial non-resident taxpayer status until 1 January 2027. Should the 30% facility subsequently be terminated, the transitional rules cease to apply. This can only be different if the employee changes employers, and the period between the old and the new employer is less than three months.

Substantial increase of threshold salaries

The 30% facility's threshold salaries will be increased substantially as of 1 January 2024:

• The general threshold salary will increase to EUR 46,107 (from EUR 41,954 in in 2023).
• The threshold salary for employees below 30 years of age in possession of a qualifying Master's degree, will increase to EUR 35,048 (from EUR 31,891 in 2023).
• The amounts mentioned above refer to the taxable salary (i.e., after applying the tax-free 30% reimbursement). The threshold salaries should be met on a continuous basis. If the threshold salary changes for an employee (e.g., due to the annual increase, or by reaching the age of 30), the salary should therefore be reset to meet the new threshold.

Future developments

It is worth noting that these amendments have been received critically by many experts, who are concerned about the potential damage they may cause to the Dutch economy and labor market. Therefore the 30% facility, and the recent changes made to it, will be evaluated further during 2024. Depending on the outcome of this evaluation, the changes may be updated, (wholly or partially) withdrawn, or amended. This evaluation is first expected in the Spring Memorandum, and the definitive alternative(s) are expected to be part of the 2025 Tax Plan.

Note for employers

We recommend that employers examine their December 2023 payroll, to verify whether the applicable 2023 threshold salaries are met for all employees. Since numerous changes are introduced to the 30% facility for 2024 (such as the maximum salary and the percentage decreases as described above), we advise that employers also take this moment to review whether (i) the fixed tax-free 30% reimbursement should be applied, or rather (ii) the incurred extraterritorial costs should be reimbursed. In general, the latter implies an additional administrative burden, but may be tax-beneficial to the employee.

If you have any questions about how these developments may affect your workforce, please feel free to reach out to the authors of this alert.