Limitation 30% ruling as of 2024 affects more employees than expected!
Limitation 30% ruling as of 2024 affects more employees than expected!
In the Tax Plan 2023, the Dutch government proposed to limit the 30% ruling. In short, the limitation means that starting in 2024, the amount of the untaxed 30% allowance will be capped at 30% of the ‘Balkenende norm’. In 2022, that norm is €216,000, making the maximum untaxed compensation (based on 2022 figures) €64,800. At first glance, this limitation seems to affect only a small group of employees. But in practice it could work out differently....
Apply per payroll period
Because the maximum amount per year must be recalculated if the employee leaves employment during the year, it is expected that most employers will work with a maximum 30% allowance per month. This avoids the need for a correction when the employee leaves employment and keeps the employee's monthly net income constant. Based on the 2022 figures, the maximum tax free allowance per month is €5,400. If the employer takes into account the maximum allowance per month, then employees earning less than €216,000 per year will also be able to face this limitation.
An example
An employee who receives a monthly salary-sized bonus for 2023 in January 2024 may already exceed the maximum 30% allowance amount of €5,400 with a regular monthly salary of €9,001 or more. In this example, an employee earning €125,654 per year (13.96 x €9,001) already faces the consequences of the limitation.
Transitional law
The intention is that for all employees already using the 30% rule in December 2022, the restriction will not apply until January 1, 2026. There is no full transitional law for existing users of the rule, so it seems advisable to assess for this group what the consequences will be as of 2026 so that you can take action where needed. The big question here is whether the employee or you as the employer should bear the (negative) consequences. Reviewing the labor agreements you have made with these employees in the past is therefore important.
Action needed?
It is advisable to identify which current employees will be affected by the restriction of the 30% ruling and to discuss the consequences with the employees. It is also advisable to assess for newly hired employees whether it may be useful to bring forward the start date to December 2022 so that the transitional right can be used.
In the Tax Plan 2023, the Dutch government proposed to limit the 30% ruling. In short, the limitation means that starting in 2024, the amount of the untaxed 30% allowance will be capped at 30% of the ‘Balkenende norm’. In 2022, that norm is €216,000, making the maximum untaxed compensation (based on 2022 figures) €64,800. At first glance, this limitation seems to affect only a small group of employees. But in practice it could work out differently....
Apply per payroll period
Because the maximum amount per year must be recalculated if the employee leaves employment during the year, it is expected that most employers will work with a maximum 30% allowance per month. This avoids the need for a correction when the employee leaves employment and keeps the employee's monthly net income constant. Based on the 2022 figures, the maximum tax free allowance per month is €5,400. If the employer takes into account the maximum allowance per month, then employees earning less than €216,000 per year will also be able to face this limitation.
An example
An employee who receives a monthly salary-sized bonus for 2023 in January 2024 may already exceed the maximum 30% allowance amount of €5,400 with a regular monthly salary of €9,001 or more. In this example, an employee earning €125,654 per year (13.96 x €9,001) already faces the consequences of the limitation.
Transitional law
The intention is that for all employees already using the 30% rule in December 2022, the restriction will not apply until January 1, 2026. There is no full transitional law for existing users of the rule, so it seems advisable to assess for this group what the consequences will be as of 2026 so that you can take action where needed. The big question here is whether the employee or you as the employer should bear the (negative) consequences. Reviewing the labor agreements you have made with these employees in the past is therefore important.
Action needed?
It is advisable to identify which current employees will be affected by the restriction of the 30% ruling and to discuss the consequences with the employees. It is also advisable to assess for newly hired employees whether it may be useful to bring forward the start date to December 2022 so that the transitional right can be used.