Further restrictions on the Dutch 30%-facility for expats adopted by the Dutch House of Representatives

On October 27, 2023, the Dutch House of Representatives adopted amendments to this year’s tax plan (Tax Plan 2024) to even further restrict the 30%-facility (by gradually reducing it to 10%) on top of the restrictions that were adopted as part of last year’s Tax Plan (introduction of a cap) and to abolish the so-called partial foreign taxpayer status. If adopted by the Dutch Senate, the changes to the 30%-facility will take effect from January 1, 2024 whereas the abolishment of the partial foreign taxpayer status takes effect from January 1, 2025.

Introduction of a cap to the 30%-facility

Under the 30%-facility, a tax-free allowance of 30% of an employee’s Dutch-sourced remuneration can be granted to qualifying incoming expatriates employed by a Dutch employer instead of reimbursing these employees for the real additional costs and expenses caused by their expat assignment.  

The regime is currently available for a maximum period of five years with no financial cap, but as part of last year’s tax plan the facility will be capped at the maximum wage as included in the Standards for Remuneration Act (Wet normering topinkomens), which is EUR233,000 (for 2024). This effectively results in a maximum tax free allowance in 2024 of EUR69,900. The cap will take effect from January 1, 2024 for employees that first used the 30% facility on or after January 1, 2023. For expatriates who applied the 30% facility before January 1, 2023, the cap only applies as of January 1, 2026.

30%-facility gradually reduced to 10%-facility

On October 27, 2023, the Dutch House of Representatives adopted two amendments to the Tax Plan 2024 that further scale back the 30%-facility. The first amendment regards the maximum percentage of an employee’s wage that can be paid free of tax. Under the amendment, the current percentage of 30% can only be applied in the first 20 months. For the next 20 months, the percentage drops to 20% and for the last 20 months, the percentage drops to 10%. Transitional rules apply for expatriates already applying the facility in the last wage tax period of 2023. For these expatriates, the percentage of the facility will remain 30% during the full five year term. In case of an interruption of the expat assignment to the Netherlands, the transitional rule will no longer apply for the employee (re-)qualifying as an incoming expatriate.

Abolishment of partial foreign taxpayer status

The second amendment provides that as from January 1, 2025, an expatriate using the 30%-facility and living in the Netherlands can no longer opt to be treated as a partial foreign taxpayer for Dutch income tax purposes. Under the partial foreign taxpayer rules, expatriates using the 30%-facility and living in the Netherlands, can largely remain outside the scope of Dutch taxation of income from substantial interest holdings and income from savings and investments, as only the income from real estate held in the Netherlands and the income from shares of a legal entity established in the Netherlands are included in the Dutch income tax base. By abolishing these rules, expatriates will no longer be able to benefit from this favourable rule. Consequently, expatriates that become Dutch tax residents will in principle be taxable in the Netherlands on their worldwide income unless a credit or exemption is available for foreign sourced income under Dutch domestic law or applicable double tax treaties.

Expatriates who already apply the 30%-facility in the last wage tax period of 2023 will still be able to opt for partial foreign taxpayer status until December 31, 2026 at the latest.

How does this affect your organization?

Applying the 30%-facility is optional, meaning that employers can also decide to reimburse the actual additional costs and expenses caused by their employee’s expat assignment. Since this year, this choice must be made annually and applies for the rest of the year. With all the restrictions of the 30% facility in mind, we recommend employers to reassess which of the two options is more favourable, also taking into account the administrative burden that comes along with reimbursing actual costs. We would also recommend to review your agreements with employees benefitting from the 30%-facility (these agreements are often laid down in a separate addendum to the employment contract) to check whether any amendments need to be made to ensure you can actually enforce the new caps and limitations on the 30%-facility.

Legislative process

The Dutch Senate is scheduled to discuss and vote on the Tax Plan 2024, including amendments, in December 2023. Should the Dutch Senate adopt the Tax Plan 2024, these changes may have an impact on both the Dutch employer and the qualifying foreign employee.

Our previous blogs:

Dutch Tax Plan 2024 (September 19, 2023)

Dutch Tax Plan 2023 and other tax related legislative changes (September 20, 2022)