At a glance
- In certain circumstances, foreign employees are eligible for a tax-free reimbursement of up to 30% of their salary for extraterritorial costs, for up to five years.
- From 1 January 2024 a phased reduction in the tax-free reimbursement was introduced.
- The new government has announced that this reduction will be largely reversed and has also announced certain further amendments to the scheme.
Foreign employees eligible for the 30%-ruling receive a tax-free reimbursement of up to 30% of their salary for a duration of 5 years, subject to certain conditions. This ruling allows employers to pay a portion of the salary as a tax-free reimbursement for extraterritorial costs. The employer can also choose to reimburse the actual extraterritorial costs.
From 1 January 2024 the tax-free reimbursement was revised and was structured as a 30-20-10 scheme: first 20 months: 30% tax-free, next 20 months: 20% tax-free, and last 20 months: 10% tax-free
This phased reduction in tax-free reimbursement resulted in a lower net income for the employee over time. There was a transitional arrangement for employees who were already receiving a 30% reimbursement in December 2023. These employees were not subject to the phased reduction. The tax-free reimbursement is applicable to salaries up to EUR233,000 per year (the amount for 2024), which is the cap for top salaries under the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act. For expats who have been receiving the 30% tax-free reimbursement since 2022, this salary cap will come into effect starting 1 January 2026.
Further update
In response to concerns about the economic impact of the 30%-ruling reduction, the new government has announced that the 30-20-10 scheme will largely be reversed. Although the formal amendment has not yet been published, the government has already communicated the basic principles of the proposed amendment. Starting 1 January 2027, the maximum tax-free allowance will be set at a constant rate of 27%. For the years 2025 and 2026, a 30% tax-free allowance will apply to all incoming employees.
Additionally, the threshold to qualify for the 30% ruling will be increased. The salary standard will be increased from EUR46,107 to EUR 50,436 (the amount for 2024), and for incoming employees under 30 years old with a master’s degree, the salary standard will increase from EUR35,048 to EUR38,338 (the amount for 2024). The cap for the 30% ruling which was set at EUR233,000 per year (the amount for 2024) will remain unchanged.
For employees who were already benefiting from the 30% ruling before 2024, transitional provisions will apply. They will continue to receive a 30% tax-free allowance and the previous (indexed) salary standards until the end of the term.
More to explore
