The 30% ruling is a tax benefit a lot of expats in the Netherlands benefit from for a maximum period of 5 years. If they meet the conditions, they do not have to pay tax on a maximum of 30% of their income. In addition, Box 2 and Box 3 are also exempt from tax. The 30% ruling makes working and living in the Netherlands very attractive for foreign employees. But what are the fiscal consequences if the 30% ruling expires after 5 years? We explain it in this article.
Tax return without the 30% ruling
So, the 30% expires after five years. This is not the end of the world, from now on you will be taxed the same as most residents in the Netherlands. The ending of your 30% ruling impacts your Dutch tax return; the tax benefits expire when the 30% ruling no longer applies.
No tax-free allowance: lower net payment
If the 30% ruling expires, part of your salary may no longer be paid tax-free. As a result, your net income will be significantly lower. In the table below, we give an example of the difference in the net salary. Here we assume an annual wage of €80,000 in 2022. As you can see, the difference between someone with and without a 30% tax ruling is significant. In this example, it saves more than € 12,000 on an annual basis.
| With 30% ruling | Without 30% ruling | |
|---|---|---|
| Gross salary | 80,000 | 80,000 |
| Tax-free allowance (30%) | 24,000 | n/a |
| Taxable income | 56,000 | 80,000 |
| Tax | 16,826 | 29,239 |
| Net payment | €63,174 | €50,761 |
No partial non-resident taxpayer anymore
Another advantage of the 30% ruling is that you may opt for partial non-resident status, which means you don’t have to submit your savings and investments. When the 30% ruling expires, the partial non-resident tax liability also lapses. From now on, you are a resident taxpayer, and you have to declare your worldwide income, including assets.
Do you have a second house, shares, cryptos, NFTs, or other investments? If the total amount exceeds the tax-free exemption (in 2022, this is €50,650 per person), you have to state this in your annual income tax return in Box 3. On the other hand, you may deduct debts, such as a student loan or mortgage on a second house. You will also pay tax on substantial interest after the 30% ruling has expired (Box 2).
Fiscal partners and the 30% ruling
If your 30% ruling expires, this could have consequences for the tax return of your fiscal partner. As fiscal partners, you can divide the assets amongst each other. If one of you benefits from the 30% ruling, it is wise to place all the assets with this partner. Does the 30% ruling expire? Then you are still allowed to divide the assets, but you will have to look for another optimal allocation.
Help with your tax return
Is your 30% ruling coming to an end, and could you use some help with your tax return in the Netherlands? We are more than happy to help with the annual income tax return. Please, contact us using the details below.
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