Court of Appeal: Ukrainian Employee Not Eligible for 30% Ruling

10/12/24

In a recently published judgment, the Court of Appeal in Amsterdam has ruled that a Ukrainian employee is not eligible for the application of the 30% ruling. This judgment deviates from the earlier decision of the lower court, that granted the request for the application of the 30% ruling. The inspector argued that the employee could not be considered an incoming employee at the start of his work in the Netherlands.

Background

The employee, who holds Ukrainian nationality, fled to the Netherlands with his family in March 2022 due to the war in Ukraine. Based on the European Directive on Temporary Protection, the obtained temporary residence rights in the Netherlands, which were subsequently extended. Since his arrival, the employee has registered in the Personal Records Database (BRP) and received a Citizen Service Number (BSN). From April to August 2022, he worked as a crew member on a ship under the Liberian flag in international waters. On September 1, 2022, the employee signed a 12-month employment contract with their employer and started working in October 2022. The employee and their employer requested the application of the 30% ruling.

Incoming employee

The dispute concerned whether the employee could be considered an incoming employee and thus eligible for the 30% ruling. The employee and his employer argued that the reason for migration, in this case, the war in Ukraine, is not decisive for the right to apply the 30% ruling. Furthermore, they argued residency could not be established as the employee worked on a ship in international waters from April to August 2022.

Residence

The Court of Appeal then assessed whether the employee lived outside the Netherlands at the time of signing the employment contract (September 1, 2022). Where someone lives is assessed based on all circumstances. According to case law of the Supreme Court, one is liable to pay taxes in the Netherlands if there is a lasting personal bond with the Netherlands. This bond does not need to be stronger than with any other country, thus it is possible for someone to have residence both in the Netherlands and in another country. In the Court's view, the employee had a lasting personal bond with the Netherlands on September 1, 2022, as they and their family had been residing in the Netherlands since March 2022, had taken up residence, and their children were attending a Dutch school. The fact that the employee worked on a ship in international waters from April to August, is, considering the presence of their family in the Netherlands during that period, insufficient to make the absence of a personal bond plausible.

What does this mean for your organisation?

The ruling of the Court of Appeal in Amsterdam can be significant for your foreign employees. The Court of Appeal confirms that employees are not eligible for the application of the 30% ruling if they have a personal bond with the Netherlands. In such cases, like a Ukrainian refugee who fled Ukraine due to the war and later finds work in the Netherlands, they are generally not eligible for a specific exempt reimbursement of extraterritorial costs. However, all circumstances of the individual's situation must always be considered, as specific circumstances might change the judgment.

Unfortunately, the Court of Appeal did not answer the question whether the reason for the arrival in the Netherlands is of decisive importance for the question of an employee qualifies as an incoming employee.