On October 26, 2023 the Tweede Kamer (Dutch House of Representatives) voted in favor of an amendment the tax scheme for high-skilled employees that are being recruited from abroad.
Current regulations
Under current regulations the Dutch wage tax Act arranges that high-skilled employees that are being recruited from abroad can be reimbursed upto a maximum of 30% of their salary tax exempt for a maximum period of 5 years (the so-called 30% Allowance).
Next to that for Dutch individual income tax purposes these high-skilled can opt to be (partially) treated as a foreign taxpayer. As a result of which their Box 3 income is not taxed in the Netherlands and their Box 2 income is not taxed in the Netherlands as long as it does not regard interests held in Dutch resident entities.
Proposed amendments
The 30% Allowance
It is now proposed that as of January 1, 2024 the 30% Allowance can no longer be granted for a 5 year period. Instead the first 20 months a maximum of 30% can be reimbursed tax exempt. After 20 months this 30% is lowered to 20% for another 20 month period. After 40 months the aformentioned 20% is lowered to 10% for another 20 month period.
It should be noted however that the proposal contains a transitional arrangement. This transitional arrangement will apply to 30% Allowance arrangements that are in place on December 31, 2023. In such case the old/current regulations will keep applying until the current 30% Allaowance arrangement ends.
Option to opt to be treated as a foreign taxpayer
Another proposal that got a majority of the votes in the House of Representatives is the proposal to abandon as per January 1, 2025 the option that employees to which the 30% Allowance applies currently have to opt to be treated as a foreign taxpayer.
However, also in this case the proposal contains a transitional arrangement. Under this transitional arrangement employees for which as per December 31, 2023 a 30% Allowance arrangement is in place can opt to be treated as a foreign taxpayer for Dutch individual income tax purposes until December 31, 2026.
Remarks ITP
It should be noted that for a law proposals to actually become law, in the Netherlands not only a majority of the Tweede Kamer, but also the Eerste Kamer (the House of Lords) has to vote in favor of a law proposal. The Eerste Kamer is expected to discuss and vote on the proposals in the coming months and judging on the voting in the Tweede Kamer it is to be expected that the proposals also will get a majority in the Eerste Kamer.
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