Terminating the 30% ruling brings significant tax consequences that international professionals must take into account. Whether the ruling expires automatically after five years, ends due to a job change, or is voluntarily terminated, the impact on your tax situation can be substantial. From higher income tax to potential repayment obligations, it is crucial to be prepared for these changes.
The tax consequences of terminating the 30% ruling extend across various aspects of your Dutch tax situation. In addition to losing the tax benefit on 30% of your salary, your obligations regarding pension premiums, social security contributions, and your overall net income also change. Proper preparation and understanding of these consequences helps you navigate the transition smoothly.
When Does the 30% Ruling End Automatically?
The 30% ruling ends automatically in various situations, with the maximum duration of five years being the most common reason. For applications approved after January 1, 2019, this five-year term applies. Employees who applied for the ruling earlier can still benefit from longer terms: eight years for applications between 2012 and 2019, and ten years for applications before 2012.
A job change can also lead to the termination of the ruling. When you change employers, you have three months to find a new job that meets the conditions of the 30% ruling. Within four months of accepting your new position, you must submit a new application. Your new employer must again provide a written statement that you possess scarce skills or expertise.
The ruling also ends when you no longer meet the conditions. This can happen if your salary falls below the minimum threshold, or if you no longer qualify as a highly skilled migrant. Additionally, you can choose to terminate the ruling voluntarily, for example when moving abroad or making a career switch.
Direct Tax Consequences Upon Termination
Terminating the 30% ruling has immediate consequences for your tax burden. The most direct effect is the increase in your income tax, because your full salary now becomes taxable. Where previously 30% of your salary was tax-free, this amount now falls under regular Dutch tax rates.
The impact on your net salary can be considerable. For a salary of €70,000, losing the 30% ruling means you must pay tax on an additional €21,000 per year. This results in a net income reduction of several hundred euros per month, depending on your specific situation.
| Gross Annual Salary | 30% Ruling Benefit | Additional Tax Burden After Termination | Estimated Net Impact Per Month |
|---|---|---|---|
| €50,000 | €15,000 tax-free | €5,925 | €494 |
| €70,000 | €21,000 tax-free | €8,295 | €691 |
| €90,000 | €27,000 tax-free | €13,365 | €1,114 |
In addition to income tax, you also lose other tax benefits. The possibility to choose partial foreign tax liability in box 2 and box 3 expires from 2025 for new users of the ruling. This means you must pay tax on assets and investments according to regular Dutch rules.
Repayment Obligations and Additional Assessments
Early termination of the 30% ruling can create repayment obligations. The Tax Authority can impose additional assessments if it appears you have wrongfully used the ruling, or if you no longer meet the conditions.
Additional assessments are calculated over the period during which you wrongfully used the ruling. If, for example, it appears you no longer met the salary conditions for six months, then you must pay the full tax amount for that period. This often includes interest and penalties as well.
The calculation of additional assessments is done retroactively. The Tax Authority recalculates your tax assessment as if you had not used the 30% ruling during the relevant period. This can result in substantial amounts, especially with higher salaries and longer periods.
It is important to act proactively when changes occur in your situation. Report changes to the Tax Authority promptly to avoid additional assessments and penalties. When in doubt about your eligibility, it is advisable to seek professional advice before problems arise.
Practical Steps After the 30% Ruling Expires
After terminating the 30% ruling, there are various practical steps you must take. Start by adjusting your payslip in consultation with your employer. Your payroll administration must be adjusted so that your full salary becomes taxable again.
Your tax return requires special attention in the year the ruling ends. You must indicate during which period you used the ruling and when it was terminated. Keep all relevant documents, including the original decision from the Tax Authority.
Revision of pension premiums and social security contributions is necessary. Because these calculations are based on your taxable salary, your premiums increase after termination of the ruling. This also has positive consequences for your future benefits, which are now based on a higher amount.
Also consider the impact on other tax obligations. If you own a home in the Netherlands, there may be changes in your mortgage interest deduction. Additionally, from 2025 you must pay tax on assets in box 2 and box 3 according to regular Dutch rules, unless you can use transitional arrangements.
Terminating the 30% ruling marks an important transition in your Dutch tax situation. By taking timely action and seeking professional advice, you can make this transition smooth. A thorough evaluation of your complete tax situation helps you prepare for the changes and identify possible optimizations for your new tax situation. For personalized guidance through this complex process, contact our tax specialists.
