At a glance
- Foreign employees under certain conditions 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 tax-free reimbursement applies to salaries up to EUR233,000 per year.
- Due to concerns about the economic effects of the 30%-ruling reduction, the government has expedited its evaluation, potentially presenting an alternative proposal in the Tax Plan for 2025. The final report is expected in July.
Under certain conditions, foreign employees are eligible for the 30%-ruling. This is a tax-free reimbursement, paid by employers for extraterritorial costs, of up to 30% of an employee's salary for up to five years. The employer can also choose to reimburse the actual extraterritorial costs.
From 1 January 2024 the tax-free reimbursement was revised and is structured as follows:
- The first 20 months: 30% tax-free.
- The following 20-month period: 20% tax-free.
- The last 20 months: 10% tax-free.
This phased reduction in tax-free reimbursement results in a lower net income for the employee over time. There is a transitional arrangement for employees who were already receiving a 30% reimbursement in December 2023. These employees are not subject to the phased reduction.
The tax-free reimbursement applies to salaries which are up to EUR233,000 per year 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.
Recently, concerns have been raised about the economic effects of the reduction of the 30%-ruling. Considering this the government has expedited the evaluation of the 30%-ruling. This way an alternative proposal for the reduction may be presented in the Tax Plan for 2025. The final report on this is expected in July.
