Through the so-called 30 percent ruling, highly qualified staff members from abroad can receive 30 percent of their gross income tax-free for eight years. As an employer of many highly educated foreign staff, universities are big users of this ruling. Three hundred international staff members at Erasmus University fall under the 30 percent ruling.
Transition period
The cabinet wants to shorten the ruling from eight to five years. Initially, this was going to be introduced without a transitional arrangement. As such, everyone who has worked in the Netherlands for at least five years and who receives the tax benefit would lose out considerably from 1 January. That loss of income can amount to hundreds of euros a month.
However, now that the dividend tax is no longer being abolished, there are plans to introduce a transitional arrangement. This means that international staff who have already worked their five years will only feel the impact in January 2021. Staff who have only been working in the Netherlands for one, two or three years are the unlucky ones: they will only receive 30 percent of their gross income tax-free for five instead of eight years.
Worst case scenario
Jason Roos, associate professor of Marketing Management, is one of the three hundred international staff members at Erasmus University who fall under the ruling. His tax benefit stops in a year and a half’s time, so he won’t personally feel the impact of the new transitional arrangement. “I’m happy that I might not lose the 30 percent ruling in January, but it’s hard to be excited about this transitional plan when my junior colleagues will still be so much worse off under it.”
“My net income would have dropped by more than 15 percent, at least hundreds of euros a month,” he says about the uncertainty which he had felt until this week. “In the short term we would have been able to manage with our savings. My wife was planning to go back to work, but this would have meant her having to find a job immediately. The worst-case scenario would have been that we had to move or that I would have to find another job.”
Although Roos is delighted that he won’t be affected, he is still frustrated about the limited transition period. “An academic who was promised eight years of 30 percent tax-free income and who has been here one to three years already will get almost 40 percent less than what they were promised. The government uses this labour policy to attract people from abroad for a certain amount of time and after attracting those people, the policy is suddenly almost cut in half. That leaves a lot of people in dire straits.”
'I’d find it unfair to pay the same tax rate'
Alexander Jachnow from the Institute for Housing and Urban Development Studies (IHS) will suffer from the shortening of the 30 percent ruling. Initially he was preparing for a loss of income of around 1,000 euros a month: 36,000 euros in the next three years. With the new transitional arrangement, that’s still 12,000 euros.
Jachnow is a great supporter of this specific benefit for expats. The 30 percent ruling is mainly intended to compensate expats for extra costs related to installing themselves with their families in the Netherlands. Jachnow feels that it is justified that expats who stay only for a limited time here should pay less tax because they make less use of public facilities. “Generally, expats’ children need to go to an expensive international school because they are not easily integrated in the Dutch system. That’s about 10,000 euros per year per child. I pay tax, and I am certainly not against paying tax, but I’d find it unfair to pay the same tax rate when we come here as highly educated experts: we have not been brought up here, did not use the educational system and are likely to leave the Netherlands before our retirement. I don’t feel that an expat should have the same tax obligations as a Dutch colleague who will benefit two or three times more from all kinds of public benefits than an expat does.”
Salary negotiations
For both Roos and Jachnow, the 30 percent ruling played a role in them choosing a job at Erasmus University. More importantly, both say that the tax benefit was part of their salary negotiations. “The ruling played a role in my decision to accept a job here. And it played a role in my not accepting a recent offer somewhere else,” says Roos. “The salaries that people accept here are a lot lower than the salaries in the US or Canada.” According to Jachnow, the shortening of the 30 percent ruling will cause problems in recruiting international talent. “Without the tax benefit, I could earn much more in Germany, for example, for exactly the same job.”
