30 per cent ruling to be confined from 2024 after a vote by Dutch MPs

Also known as the 30% facility or 30% ruling, This directive was implemented initially to attract professionals from overseas with industry-specific knowledge that was in deficit in the Netherlands. It reduced the percentage of one's salary that could be taxed by the Dutch government, leading to savings for the tax bill of skilled foreign workers.

In the vote that took place on the 26th of October, 2023, Dutch MPs voted in favour of a motion to place a significant cap on the existing directive. In a move that took place on the last day in parliament before the general election, major political parties such as GroenLinks / PvdA and ChristenUnie showed their support for the motion.

Four years ago, in 2019, the maximum validity of the ruling was reduced by the Dutch Government from eight years to five. However, Omtzigt and his supporters propose a new amendment to limit the ruling further. As per the amendment, starting from the 1st of January 2024, the ruling will remain valid for five years, but the 30% tax break will only be applicable for the first 20 months. Following this, the tax exemption will be reduced to 20 per cent of the employee's salary for the next 20 months and then further reduced to 10 per cent for the final 20 months. The amendment includes a transition period for those currently benefiting from the tax break.

The limit to the ruling and the subsequent savings it will generate will be utilised to reduce the interest paid by students on loans for their education. The interest paid on student loans is set to increase by 2% from 0.46% to 2.46%.

What was the possible motivation for the vote to limit the 30% ruling?

In short, Housing. Omtzigt has claimed that the housing crisis in Dutch cities such as Amsterdam has been a result of the 30% ruling. He stated that the ruling has enabled expats to pay more for rent, causing inflation in the Dutch housing market and pricing local renters out of the market.

Omtzit, formally of the Christian Democratic Appeal and founder of the party, New Social Contract, currently stands favourably in the polls. The MP has been campaigning for a reduction in the 30% ruling and states in his manifesto that the ruling should be eliminated in its entirety.

While housing concerns drove the motivation for the vote, the implications of this ruling could impact the attraction of foreign talent to the Netherlands in the future and current contractors working in the country.

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