The 30% ruling ends, the best tax benefit we have and for many of you this benefit is terminated on January 31, 2020. What then?
30% ruling ends
The 30% ruling is the best tax benefit we have and an old one. In the past it was the 35% ruling, in a period where 60% to 72% income tax rates existed.
The ruling was reduced to the 30% ruling. The twelve year period to a ten year period. The ten year period to an eight year period, now we have the 5 year period.
If you received the ruling for a 10 year period in 2011 or a 8 year period in 2013, if you have used the ruling for at least 5 years, it ends December 31, 2020.
Or if you received a specific announcement from the tax office with a different date, that date rules.
30% ruling ends – what then?
Decrease net salary
We are frequently asked about the fiscal consequences of the 30% ruling ending. The consequence is that you will be doing the same job, with the same effort, but you simply get paid net much less. That is often not motivating.
Some people assume the employer will compensate the drop in net payment by losing the 30% ruling. We often have to crash that party thought, as nearly no Dutch employer will give you a 30% rise in net salary.
The tax deductions, we assume , are not much affected and if they are, in your advantage. As the taxable base goes up by losing the 30% ruling, the tax deduction is taken at a higher taxable salary.
Box 3 taxation
Suddenly you need to report your worldwide assets after the 30% ruling has been lost. We are often asked how to prevent that. You cannot. Your assets are your assets and any creative construction will not change that. Keep in mind that the tax is a small proportion of your assets, so please do not make more costs in preventing tax to be paid than you actually are asked to pay in tax.
What to do with my assets
Is a question we are asked, but we are not authorized to give financial advice nor are we educated in this field. We could say “Pay back your mortgage”. The mortgage loan is in Box 1, so you move Box 3 money to Box 1. However, once you repaid your mortgage, the bank is not giving it back to you if you are short of money due to for instance Covid 19. Then the question is, is cash king or no debt the best debt. That are questions only you can answer for yourself, nobody else.
Tax is exciting
The 30% ruling ends and for those we would like to become more Dutch, do become more Dutch after the ruling is no more. You then pay tax over the same basis as regular Dutch do. Obviously a part of you becoming Dutch you can do without.
You are to report your world wide assets. Please keep in mind, foreign property is only taxed abroad. We will be glad to assist you in filing your income tax return.