On May 20, 2022, the Dutch government published its Spring Budget Report 2022. This report contains several fiscal proposals. In this article, BDO will provide insight into the two fiscal proposals relevant to expats in the Netherlands: the proposal about the 30% ruling and the proposal about the maximum tax-free travel allowance.
30% rulingCurrently, the 30% ruling offers eligible expats a maximum tax-free allowance of 30 percent of their total taxable salary. This tax-free amount is considered to cover extraterritorial expenses (extra costs incurred due to residing outside one’s home country), regardless of the actual costs incurred.
The Spring Budget Report 2022 proposes to cap the 30% ruling as of 2024. This will be done by limiting the basis for calculation of the tax-free allowance to the maximum remuneration for senior officials in the (semi-)public sector, also known as the “WNT-standard” (216.000 euros in 2022 and indexed annually).
The Spring Budget Report 2022 mentions that transitional law will be introduced, leading to a gradual implementation of the cap, spread over a 3-year period.
To demonstrate the possible impact of this proposal on the annual net salary, we have included a simplified example. Please note that this proposal does not have an impact on expats with an annual taxable salary including the 30% ruling allowance below or equal to the “WNT standard”. The same holds for expats who have agreed on a net salary with their employers.
Current situation: Non-capped (euros) Proposed situation: Capped at € 216,000* (euros) Annual taxable salary incl. 30% ruling allowance 250.000 250.000 Subtract: 30% ruling allowance 75.000 64.800 Annual taxable salary excl. 30% ruling allowance 175.000 185.200 Subtract: tax** 78.000 83.000 Add: 30% ruling allowance 75.000 64.800 Net salary 172.000 167.000 *As the “WNT standard” for 2024 is not yet known, the example is based on the “WNT standard” for 2022.
**The example is based on the tax / social security rates for 2022.
This example illustrates that on an annual taxable salary including the 30% ruling allowance of 250.000 euros, the limitation of the basis for calculation of the 30% ruling results in a 5.000 euros decrease in annual net salary (172.000 euros minus 167.000 euros).
Travel allowanceUnder current Dutch fiscal law, the specific exemption for business travel expenses is capped at 0,19 euros per kilometre. As this maximum tax-free reimbursement of business travel expenses had not been indexed for a while, parliament already asked the Dutch government in 2019 to look into increasing this amount. The government first announced an increase of the maximum tax-free reimbursement in their coalition agreement dated January 10, 2022.
The increase would initially enter into force on January 1, 2024. However, because of the soaring fuel prices, parliament urged the government to bring this date forward. The Spring Budget Report 2022 includes the announcement that this date will be brought forward to January 1, 2023. Consequently, if this plan is executed accordingly, employers will be able to pay their employees a higher tax-free reimbursement per business kilometre as of that date.
The Spring Budget Report 2022 does not provide details about the exact amount(s) of the increase. During a debate in March 2022, the State Secretary mentioned a gradual increase of the maximum tax-free reimbursement of business travel expenses, first to 0,21 euros per kilometre and then to 0,23 euros. However, some patience with regard to the exact plans is still needed.
The final proposals regarding the cap on the 30% ruling and the increase of the maximum tax-free travel allowance will be included in the Tax Plan 2023, to be officially published on “Prinsjesdag” on September 20, 2022. However, if you would already like to survey the potential personal consequences for you, or have any further questions, please do not hesitate to get in touch with BDO. They are happy to help.