Earlier this week, the Senate approved the 2024 Tax Plan, including the changes for the 30% ruling.
This means that the relaxation of the 30% rule will take effect on January 1, 2024.
The maximum period for the 30% rule remains 5 years, however at most 20 months with 30% benefit. After that, a 20% rule applies for 20 months and another 10% rule applies in the 20 months after that.
In addition, partial foreign tax liability will be abolished by Jan. 1, 2025. This means that the employee with a 30% rule will have to pay income tax in Box 2 and Box 3 as a domestic taxpayer as of Jan. 1, 2025. An additional benefit that is thus abolished.
For existing cases, there is transitional law. This transitional law applies to employees with a 30% rule applied in the last period of 2023. For these employees, the 30/20/10% rule will not apply and a maximum of 30% can be applied for the duration of the decision. In addition, for this group, the partial foreign tax liability will not be abolished until Jan. 1, 2027, instead of Jan. 1, 2025. Otherwise, if the application of the 30% rule is broken in the meantime, the transitional rule no longer applies.
But…there is some hope that this will still be reversed.
There was much opposition in the Senate over the scaling back of the 30% rule. Accordingly, the Senate approved the 2024 Tax Plan as it stood, but recommended that the 2025 Tax Plan reverse this austerity.
This offers some hope, but it also brings with it an unpredictability that you would rather not have as an employer and expat.
If you have any questions in the meantime, please feel free to contact with us.
