Netherlands' 30% expat tax ruling reduced to 27%

At a glance

• The Netherlands has confirmed that the tax-free allowance available under the Expat Scheme will be reduced from 30% to 27% from 1 January 2027.
• The scheme allows eligible foreign employees working temporarily in the Netherlands to receive a tax-free allowance to compensate for additional costs associated with living and working abroad.
• A higher salary threshold will apply from 2027, and transitional measures will determine whether affected employees can continue benefiting from the current 30% rate.
• Employees who were already using the scheme by the end of 2023 will continue to benefit from the 30% allowance under the existing rules.
• The tax benefit remains capped at annual remuneration of EUR262,000, with this cap applying to all beneficiaries from 1 January 2026.

The Dutch government has confirmed changes to its Expat Scheme, under which eligible foreign employees working temporarily in the Netherlands may receive a tax-free allowance to compensate for additional costs associated with living and working abroad.

Currently, the scheme provides a tax-free allowance of up to 30% of eligible remuneration. However, from 1 January 2027, the maximum allowance will be reduced to 27%. A higher salary threshold will also apply from that date.

Transitional rules will apply depending on when an employee first became eligible for the scheme. Employees already benefiting from the arrangement by 31 December 2023 will continue to be covered by the existing 30% rate, while individuals who entered the scheme from 2024 onwards will generally be subject to the reduced 27% rate from 2027.

The regime remains subject to a remuneration cap of EUR262,000 per year, which will apply to all beneficiaries from 1 January 2026. Employers with internationally mobile workforces may wish to review the changes and assess their potential impact on assignment costs, recruitment strategies and employee compensation packages.