Evaluation expat ruling

30% ruling

The 30% ruling allows the employer to pay a maximum of 30% of the salary tax-free to scarce and specifically expert employees from abroad for a maximum period of five years. The study of the 30% ruling shows that the 30% ruling is effective and partly efficient. The scheme has a positive influence on the attraction of highly skilled migrants, who consciously choose the Netherlands over other countries, partly due to the tax advantage offered by the 30% ruling. In this way, the 30% ruling also contributes to the Dutch business climate. The study states that the salary standard is an appropriate interpretation to determine the expertise requirement.

And although the scheme reduces tax revenue because some users would have come to the Netherlands even without this incentive, it also generates income by attracting others who would not have come otherwise. According to the study, the 30% ruling even generates an average of 128.5 million euros in net tax annually.

However, it is pointed out that from the goal of creating a level playing field between 30% employees and other employees, there is an excessive tax-free allowance to achieve this goal. In most situations, it is indicated that the actual extraterritorial costs (ET costs) are less than 30%. It is striking that in the previous evaluation (Dialogic, 2017) a higher percentage of actual ET costs was found. It is indicated that the difference probably follows from the method used. The evaluation also shows that the scheme only leads to limited crowding out of the housing market by highly skilled migrants.

The reduction of the scheme to a 30%-20%-10% allowance is expected to reduce the influx of highly skilled migrants by 15 to 20 percent, which will have a negative impact on the business climate. Furthermore, the evaluation recommends using a fixed flat rate for the entire term in order to reduce the administrative burden.

Partial non resident

If an employee makes use of the 30% ruling, they can opt for the so-called partial non resident status. In that case, the employee is treated as a non-resident for income tax purposes in box 2 and box 3. The evaluation shows that the partial foreign tax liability is neither effective nor efficient. The study concludes that the abolition of the partial foreign tax liability will hardly limit the influx of highly skilled migrants. An exception to this is a very limited group of (ultra) high-net-worth expats.    

Extraterritorial costs scheme  

The extraterritorial costs scheme (ETC) is a scheme under which the employer reimburses the actual costs related with working in the Netherlands for employees from abroad. The ETC scheme can be used both for employees who do not meet the salary standard of the 30% ruling and for employees for whom the 30% ruling applies, but do not make use of the lump sum. When used, the ETC scheme is effective in reimbursing actual costs. The scheme works well for reimbursing rental charges and living expenses. However, due to high administrative burdens, the scheme is also often not used, which results in the assessment of 'partly effective'.

The reduction of the 30% lump sum to 20 percent and 10 percent may increase the use of the ETC scheme. A shift to the ETC scheme is unlikely to be effective or efficient. The main reason for this is that if the shift takes place, the administrative burden will increase among users of the scheme and for the tax authorities.