What Is the 30% Ruling? 

The 30% ruling is a well-known Dutch tax facility designed to attract highly skilled workers recruited from abroad. Under this scheme, qualifying employees can receive up to 30% of their gross salary as a tax-free allowance, intended to offset the extra costs of relocating and working in the Netherlands, such as housing, travel, and higher living expenses. These are referred to as extraterritorial costs. 

To qualify, an employee must be recruited from outside the Netherlands, possess specific expertise that is scarce or unavailable in the Dutch labour market, and must have lived more than 150 kilometres from the Dutch border for at least 16 of the 24 months prior to starting work in the Netherlands. The ruling can be applied for a maximum duration of five years (60 months). 

The 30% ruling serves a dual purpose: (1) it benefits expats financially, and (2) it helps the Netherlands maintain a competitive business climate by making it easier for Dutch employers to attract international talent. 

The ruling also unlocks several additional advantages for eligible employees: the ability to exchange a foreign driver's license for a Dutch one without retaking the test, tax-free reimbursement of international school tuition and transportation costs for families, and the option for employers to cover relocation and moving expenses tax-free, which help ease the financial pressure of relocating to the Netherlands. 

Why Is the 30% Ruling Being Changed? 

The 30% ruling has undergone several revisions in recent years. The most controversial of these was a measure introduced on the 1^st of January 2024, which gradually scaled back the tax-free allowance from 30% to 20% and then to 10% over the five-year ruling period. This so-called 30-20-10 reduction was met with widespread criticism from businesses, employers, and expat communities, who argued it damaged the Netherlands' attractiveness as a destination for international talent. 

In response, the Dutch Ministry of Finance commissioned an independent evaluation of the 30% ruling. The research concluded that the gradual reduction had a negative effect on the Dutch business climate and that maintaining a flat rate results in lower administrative burdens for both employers and employees. Based on these findings, the Dutch government announced on Budget Day 2024 that the 30-20-10 reduction would be reversed — before it had even been fully applied in practice. 

However, the government also proposed a new, permanent adjustment: from the 1^st of January 2027, the flat-rate tax-free allowance will be reduced from 30% to 27%. This change is intended to partially offset the fiscal cost of reversing the earlier reduction, while still being more stable and predictable than the 30-20-10 approach. 

The 27% Ruling: What Changes from the 1^st of January, 2027? 

As of January 1^st, 2027, the 30% ruling will effectively become the 27% ruling. The key changes are as follows: 

• Tax-free allowance reduced: The maximum tax-free flat-rate allowance will drop from 30% to 27% of an employee's capped salary. The cap is the WNT (Wet Normering Topinkomens) norm (in 2025: €246,000). 
   
• Salary norm increase: The minimum taxable salary required to qualify for the ruling will increase from €46,107 to €50,436 (based on 2024 figures, subject to annual indexation). For employees under 30 with a qualifying master's degree, the threshold rises from €35,048 to €38,338. 
   
• Flat rate for 2025 and 2026: For the years 2025 and 2026, all incoming employees will continue to benefit from the full 30% flat rate. The reduction to 27% only kicks in from 2027. 
   
• Alternative reimbursement remains available: If an employee's actual extraterritorial costs exceed the 27% flat rate, employers can still choose to reimburse those real, documented costs instead, provided they are recorded per employee in the payroll administration. 

Transitional Arrangements: Who Is Protected? 

The changes do not apply equally to everyone. The Dutch government has introduced transitional rules to protect employees who are already using the ruling: 

• Applied the ruling before 1 January 2024: These employees retain the 30% flat rate and the original salary norms for the full duration of their ruling. The reduction to 27% does not apply to them. 
   
• Applied the ruling for the first time in 2024: The old salary norms remain in effect throughout the ruling period. However, the flat rate will drop to 27% as of January 1^st 2027. 
   
• Applying the ruling from 2025 onwards: These employees will be subject to both the 27% rate and the higher salary norms from 1 January 2027. 

It is also worth noting that if an employee changes employers, the transitional arrangements continue to apply with the new employer, provided the new employment contract is signed within three months of leaving the previous employer. 

Who Is Affected by the 27% Ruling? 

The changes primarily affect expats who are newly arriving in the Netherlands from 2025 onwards, as well as employers who are currently hiring or planning to hire international talent. Specifically: 

• Highly skilled migrants and international employees recruited from abroad who will start using the ruling in 2025 or later will see a lower take-home benefit from 2027. 
   
• Employees who began using the ruling in 2024 will experience a reduction in the tax-free allowance from 2027, though they retain protection on the salary threshold. 
   
• Employers in the Netherlands will need to track which employees fall under which transitional category and adjust their payroll administration accordingly. 
   
• Seconded employees (posted from the Netherlands to another country) are also affected. Unlike incoming employees, no exception exists for secondments that started before 2024 — the 27% cap will apply to all of them from 2027. 

The abolishment of the partial non-resident taxpayer status, which allowed expats with the 30% ruling to be treated as non-residents for Box 2 (substantial interest income) and Box 3 (savings and investments) also remains in effect from 2025. This change adds an additional tax liability for some expats, particularly those with significant investment income or Dutch assets. 

Pros and Cons: How to Weigh the Changes 

What works in your favour: 

• The 30-20-10 phased reduction has been fully reversed, meaning the ruling no longer deteriorates year by year — a significant win compared to what was in place from 2024. 
   
• A flat rate throughout the five-year period means greater financial predictability and less complexity in payroll administration. 
   
• Employees who started using the ruling before 2024 are fully protected and will see no changes at all. 
   
• Those who started in 2024 retain the existing salary threshold, limiting the impact of the reform on them. 

What works against you: 

• The net tax benefit decreases: a 3-percentage point drop from 30% to 27% translates into a tangible reduction in monthly take-home pay for affected employees.
   
• The higher salary norm (from €46,107 to €50,436) means some employees who previously qualified may no longer meet the threshold from 2027, effectively losing access to the ruling entirely.
   
• The abolishment of the partial non-resident status adds an additional tax burden for expats with foreign investment income or Box 2 and Box 3 assets.
   
• Employers face increased administrative complexity in tracking and applying different rates and thresholds for different groups of employees simultaneously. 

What Should You Do If You Are Affected? 

Whether you are an expat currently benefiting from the 30% ruling or an employer managing international staff, there are several practical steps worth taking before 2027: 

• ​Determine your transitional category. Your start date for the ruling is the key factor in determining which rules apply to you. If you are unsure, check with your employer's HR or payroll team. 
   
• Review your salary. With the salary threshold rising to €50,436 (indexed) from 2027, employees with salaries close to the current minimum should assess whether they will still qualify. 
   
• Consider whether actual ET costs exceed 27%. If your real extraterritorial costs (such as housing allowances, international school fees, or travel expenses) are higher than the flat rate, opting for actual cost reimbursement may be more beneficial. Your employer must keep records. 
   
• Plan for the end of the partial non-resident status. If you have foreign assets or substantial interest income, you may now be taxed on these in the Netherlands. Seek tax advice to understand the impact on your Box 2 and Box 3 position. 
   
• Employers: update payroll and communicate clearly. Track which employees fall under which category. Clearly communicate changes to affected staff well ahead of January 2027. Payroll professionals should prepare for administrative adjustments now. 

The transition from the 30% ruling to the 27% ruling represents a genuine cost reduction for expats arriving in the Netherlands from 2025 onwards, but it is also a significantly more stable and transparent framework than the short-lived 30-20-10 model it replaces. For most employees currently benefiting from the ruling, the transitional protections mean limited immediate impact. For newcomers, planning ahead and understanding the new thresholds and rates will be essential to making the most of the facility. 

Need personalised tax advisory for the 27% ruling? Don't hesitate to reach out to us!