On September 20, 2022, the Dutch government announced the budget plans for 2023. In this article, BDO informs you about the parts of the budget plans that are relevant for expats and people considering moving to the Netherlands to work: the tax-free travel allowance, tax-free home-work allowance and the 30% ruling.

Travel allowance

The Dutch government wants to accommodate workers by increasing the tax-free travel allowance. For years the tax-free travel allowance has been capped at 0,19 euros per kilometre but, due to rising travel costs, the Dutch government has reached the conclusion that the aforementioned tax-free travel allowance no longer covers the travel costs for workers. Therefore, the Dutch government proposed to increase the tax-free travel allowance to 0,21 euros per kilometre in 2023 and 0,22 euros per kilometre in 2024.

Home-work allowance

The Dutch government wants to accommodate workers who work (partly) from home due to increased gas prices. Currently, the tax-free home-work allowance amounts to 2 euros a day. The Dutch government has proposed an increase in the tax-free home-work allowance to 2,13 euros per day in 2023.

The 30% ruling

The 30% ruling offers expats (who meet certain conditions) a tax-free allowance of 30 percent of their taxable salary. This tax-free allowance is considered to cover so-called extraterritorial costs (extra costs due to residing in the Netherlands).

The 30% ruling is granted by the Dutch tax authorities, subject to a number of conditions, notably:

• The expat should have been hired from outside the Netherlands.
• The old place of residence(s) should be at least 150 kilometres from the Dutch border for more than 16 out of the last 24 months before the first working day in the Netherlands.
• The expat should be in the possession of expertise that is hard to find in the Netherlands.

The verification of the "expertise" condition is usually determined by reference to the salary of the expat. In the year 2022 (we expect the threshold salary for 2023 to be announced in December) the annual taxable salary should amount to at least:

• 39.467 euros
• 30.001 euros for expats who are younger than 30 and possess a qualified master’s degree

In case an expat meets the conditions of the 30% ruling and a 30% ruling decree is issued by the Dutch tax authorities, the salary is untaxed for a maximum of 30 percent for a period of a maximum of five years. At the moment, the amount of annual salary is unlimited.

The Dutch government is planning to cap the salary up to 216.000 euros (numbers 2022) as of the year 2024. This cap is the so-called "Balkenendenorm" which is equal to 130 percent of what a minister in the Netherlands earns as a salary. The "Balkenendenorm" is indexed annually and therefore the cap might be higher in 2024 and beyond.

Example

Current situation

Assume that an expat earns 250.000 euros a year, which is fully taxable in the Netherlands. The 30% ruling is applicable to the total amount. The tax-free allowance under the 30% ruling amounts to 75.000 euros (30 percent of 250.000 euros).

New situation per 2024 (note: not per 2023!)

Again, assume an expat earns 250.000 euros a year, which is fully taxable in the Netherlands. The 30% ruling will only be applicable up to a salary of 216.000 euros (this amount will be increased for inflation before 2024). The 30% ruling tax-free allowance amounts to 64.800 euros (30 percent of 216.000 euros).

Transitional period

For expats for whom the 30% ruling is applied in the last wage tax period of 2022 (December 2022), a transitional period is proposed whereby the capping of the salary will only apply as of January 1, 2026. For new expats as of 2023, it is already clear in advance that the salary will be capped as of January 1, 2024, so no transitional law is considered necessary.

Conclusion

Expats may expect that, as of 2023, the tax-free travel allowance is increased to 0.21 euros per kilometre. Furthermore, the tax-free home-work allowance (for expats who work partly from home) will increase to 2,13 euros per day.

Expats who are now eligible for the 30% ruling and earn more than 216.000 euros annually (including variable salary components, such as bonuses), may receive a smaller tax benefit under the 30% ruling tax-free allowance as of January 1, 2026. Individuals who are considering working in the Netherlands by 2023, and also meet the conditions of the 30% ruling, can expect their annual salary to be capped as of January 1, 2024.

However, the plans announced on Budget Day still have to pass through the House of Representatives and the Senate (in Dutch: Tweede en Eerste Kamer) and only become official when declared an Order in Council (Algemene Maatregel van Bestuur) and after publication in the Staatsblad or the Staatscourant. An official announcement will follow at the end of this year.

Still have questions about how the 2023 budget affects you? Then don't hesitate to contact BDO! Their professional team are on hand to answer any questions you might have regarding the budget and your finances.