There are various circumstances in which the question of whether an expat receives benefit from the 30% ruling might simply come down to planning. For example, if a worker is coming towards the end of the period during which they are entitled to the 30% tax-free allowance and are also due a bonus, they may be able to talk to their employer in order to arrange to receive the bonus before the end of the qualifying period.
The 30% ruling applies only to income paid during the five-year period. This means that even if the bonus is for work performed during the employee’s qualifying period, if it is paid after the end date, it will be taxed at the full rate – without the benefit of the 30% exemption. Employees who face this or a similar type of situation should talk to their employer about the possibility of bringing any such payment forward so that it falls within their exemption period.
Partial non-tax residency
Any expat who is entitled to 30% ruling status has the option of being treated as a partial non-tax resident. This can confer tax benefits on various types of worldwide income, including that which is derived from investments.
With the reduction of the 30% ruling period from eight to five years, on expiry of the five-year period all foreign assets will attract tax inside the Netherlands – the exception will be where double tax treaties allow otherwise.
Extra-Territorial Costs Reimbursement
The 30% ruling is a progressive exemption that is designed to cover the ‘extra territorial costs’ that are an inherent part of moving to work abroad. Reimbursement can happen in one of two ways: either the verifiable costs can be reimbursed tax-free or the fixed 30% can be reimbursed tax-free. With the new rules, extra territorial costs can now only be reimbursed for a maximum of five years.
Blacktower Can Help You Structure Your Wealth
The shortening of the 30% ruling is not good news for expats in the Netherlands. However, there are various ways expats can structure their wealth to ensure they retain as much of their income as possible – for example, if your spouse also enjoys 30% ruling status but this ends at a later date, you may be able to put certain assets in their name.
If you would like help structuring your wealth and building a long-term strategy for your finances and retirement income, talk to Blacktower’s expat financial advisers in the Netherlands today.