The 30% ruling tax exemption will change: What does it mean for expats?
The Dutch government approved a reduction in the 30% tax benefit for foreign professionals, effective from January 1, 2024. What are the changes, and how do they impact expats and their mortgages?
What is the 30 % tax ruling?
The 30% ruling is a tax benefit for highly skilled migrants who move to the Netherlands for a specific job. If they meet the right conditions, their employer can give them a tax-free allowance of 30% of their gross salary, subject to Dutch payroll tax. This money is meant to help cover the extra costs that international employees may have when they move to a new country for work.
Who is eligible for a 30% tax exemption?
To be eligible for the 30% ruling, several conditions must be met, including:
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You must be employed in the Netherlands.
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Your employment must meet certain income thresholds.
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You must have specific expertise or skills.
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You need to move from another country or get hired from overseas.
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You should possess particular skills or knowledge not commonly found in the Netherlands or rarely found there.
The 30% ruling and your mortgage in the Netherlands
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For higher-income professional migrants, the 30% ruling substantially boosts their net income by making 30% of their gross salary tax-free.
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When applying for a mortgage in the Netherlands, you can benefit from a 30% tax advantage. The maximum mortgage amount is determined based on your annual income, with the 30% ruling factored in for the period you're still eligible for it in the future. However, once your 30% tax benefit expires, your monthly mortgage payments will be solely based on your annual salary.
What is changing in 2024?
Starting from January 2024, the existing 30% ruling will end. However, the tax credit for highly-skilled expatriates arriving in the country will be gradually reduced, while those already in the Netherlands will not be impacted. The changes will follow:
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For the initial 20 months, a highly skilled expat won't owe taxes on 30% of their salary.
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Then, in the following 20 months, they won't have to pay taxes on 20% of their salary.
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Finally, for the next 20 months, they'll be exempt from taxes on 10% of their salary.
Why the 30 % ruling is being caped?
The Dutch government has decided to lower the country's interest rates on student loans. People from the "unfortunate generation" who had to borrow money for their education were also supposed to face interest charges on their loans. The Dutch government needs to acquire funds from another source to decrease this interest. Their solution? Eliminate the 30% ruling. The new plan by Peter Omtzigt, GroenLinks/PvdA, Volt, and the Christian Union is anticipated to generate an additional €200 million by 2029.
If you have any inquiries about the 30% ruling and how mortgage calculations work, don't hesitate to contact our team of mortgage experts.
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