The Government announced a rather rigid cut in the 30% ruling period last month. Now this rigid cut is softened for a part of the 30% ruling holders.
30% ruling cut
The 30% ruling makes that your 100% gross salary is taxed for 70% and 30% is paid out to the employee tax free. This is a ruling that does not cost the employer anything and it makes the employee chose to work in the Netherlands over the United Kingdom.
Part of the tax measures for the future was to cut the maximum period that the 30% ruling could be used from 8 years to 5 years regardless.
The Dutch Government works with budgets, and to pay for the dividend tax to be abolished, certain measures were taken, one of them this cut in applicable years.
No deal multinationals
The reason for the dividend tax to be abolished was to keep the headquarters of multinationals such as Unilever and Shell in the Netherlands. This was a deal made many years ago. Only a few weeks after the Government has met their part of the deal, abolishing the dividend tax, the multinationals announced that they do not keep their part of the deal. Unilever is moving their headquarters to the United Kingdom and soon Shell is expected to follow.
That made our Government lose face as they say in China. Part of losing face is apparently acting quick on the new information, hence the dividend tax is not being abolished. As this measure is not taken, we have 2 billion a year more budget to spend. This will be spend on the corporate part of the Netherlands.
30% ruling cut is partly postponed
Due to the multinational deal falling through there is budget to be less rigid on the 30% ruling cut, hence the ruling partly postponed. What does that imply?
That implies that the persons who would have been affected by the ruling no longer be applied in the years 2019 and 2020 can still continue to use their ruling in these years.
Who are these persons? That are the persons whom 30% ruling was used for more than 5 years in 2019 and or 2020. So the persons in their 6th, 7th or 8th year.
30% ruling cut not postponed
That implies that others, the persons whom ruling would not be affected in the years 2019 and 2020 still are entitled to use the ruling for a maximum period of 5 years. For instance an employee that obtained the ruling in 2017 for an 8 year period is indeed cut to a max 5 year period.
Orange Tax Services
We have the opinion that the Government has not been the trustworthy Government you would expect from the Dutch Government in this aspect, the 30% ruling issue. We, tax advisors, knew already a year ahead that the ruling would be cut to 5 years. But as the Government was not taking this stand point till late September, all expats trusted the change would shield existing holders from being cut. Only last week it started to sink in that this was never going to happen. Hence some expats took action and are soon moving away.
Now this week suddenly there is for some of the existing expats a softening in the rigid change, but so late in time this is being communicated, that for some expats who already took action to leave, or who shuffled their Box 3 assets, taking a loss, only to minimize taxation, are already affected.
Casualties of tax war? Maybe so, but no good showcase for the Government in place. Regardless of the change announced this week, such a rigid change to 5 years as announced before is never a good deal.