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Here’s What you Need to Know about the 30% Ruling in 2025
As we’ve entered 2025, key changes in the Dutch 30% ruling and other expat tax measures require careful attention to ensure smooth payroll processing and compliance. We’ve put together this quick guide to help you navigate how this might impact your international workforce.
New Income Cap for the 30% Ruling
Starting in 2024, the tax-free 30% reimbursement is now capped at 30% of the Balkenende standard. For 2025, this means the maximum reimbursement will be €73,800 (based on the €246,000 standard). If an employee is eligible for the 30% ruling for only part of the year, the cap will be prorated.
💡 Pro tip:
Take a moment to check which employees are impacted by this income cap. If they qualify for the 30% ruling for part of the year, don’t forget to adjust the reimbursement based on the time they’re eligible.
Say Goodbye to the 30/20/10 Reduction
Under the old rules, the 30% reimbursement would drop to 20% after 20 months, and then to 10% after 40 months. Well, those days are over. From 2025 onwards, the reduction measure will no longer apply. No more sudden cuts after 20 months—your expats can breathe easy!
End of the Partial Non-Residency Option
Previously, some expats in the Netherlands could choose to be taxed as partial non-residents, meaning they were only taxed on Dutch-sourced income. For U.S. nationals, this even meant only paying tax on income earned during days physically worked in the Netherlands. Starting in 2025, this option will be abolished. That means full global income will now be subject to Dutch taxes.
💡 Pro tip
For employees who’ve been using this partial non-residency option (especially Americans), their tax situation is about to get a lot more complicated.
NOTE: Employees who were granted the 30% ruling by the end of 2023 can still use the partial non-residency option until the end of 2026. After that, their full worldwide income will be taxable in the Netherlands. Changing employers won’t affect this timeline, as long as they continue to benefit from the 30% ruling.
“The Expat Scheme”: Introducing the 27% Ruling
Effective January 1, 2027, the maximum reimbursement under the expat tax scheme (formerly the 30% ruling) will be reduced to 27%. The Dutch tax authorities will now refer to this as the "expat scheme." This reduction follows the scheduled tapering of the 30% tax benefit for expats.
NOTE: Employees who are granted the 30% ruling no later than the final payroll period of 2023 will continue to benefit from the 30% reimbursement cap, even if they change employers, as long as the term of the ruling continues under the new employer.
One-Time Increase in Salary Thresholds
Starting in 2027, the salary thresholds required to qualify for the 30% (or 27%) ruling will increase by over 9%.
Specifically, the threshold for most expats will exceed €50,436, while for those under 30 with a qualifying Dutch or foreign master’s degree, the threshold will rise to more than €38,338. These figures are based on the 2024 thresholds and will be adjusted annually.
NOTE: For employees who were granted the 30% ruling by the final payroll period of 2024, the existing salary thresholds (i.e., €46,660 or €35,468 for younger employees with a qualifying degree) will remain in place through 2026. These amounts will continue to be indexed annually, so the thresholds for 2027 and beyond will be higher.
Action Steps for Employers
Review Employee Status: Assess each employee’s individual situation to determine which of the 2025 changes apply. Ensure that any transitional provisions are accounted for, particularly when employees change employers.
Payroll Adjustments: Plan for the necessary payroll changes in 2025 and beyond. This includes adjustments for income capping, the removal of the reduction measure, and the new taxation of worldwide income for expats previously eligible for partial non-residency.
Communicate with Employees: Your expat employees need to know what’s changing too—especially if their tax situation is about to shift. Be proactive in helping them understand how these changes affect their take-home pay.
Consult with a Tax Expert: Work closely with tax advisors to understand how these changes impact your expat employees’ global tax positions, especially for American expats and other non-resident taxpayers. Contact us for more information.
By staying informed and prepared, you can ensure compliance with the new tax provisions and continue to offer competitive and attractive compensation packages for your international talent. If you have any questions or need further clarification, our team is ready to assist you.
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