Mind the gap: how 30% ruling changes may affect your paycheck

If you are one of those clever people who spent years studying abroad and is now contributing skills to the Dutch economy, there’s good and bad news.

Some economists in the Netherlands have raised alarm bells at the drop in highly-skilled migrants since the failed “hard right” government in 2023. The first international scientists have landed in the Netherlands as the result of a new “tulip” fund to support top thinkers.

But at the same time, the country is winding back a ruling to compensate some temporary highly-skilled workers for their costs, and it will in future be restricted to people with even higher salaries.

From next year, for new highly-skilled migrants and everyone who arrived after January 1, 2024, the 30% ruling for people with rare skills will be cut to 27%. This means that for five years, the first 27% of their salary will be paid untaxed – an incentive to make this high-tax country more attractive and compensate top international talent for costs such as expensive housing.

“This will make a difference of between €50 and €100 a month for most of the people we help,” said a tax adviser for Blue Umbrella. “One more dinner at home each month, perhaps, but it is still money.”

The tax break, which has strict conditions and must be applied for by the employer, will also only be valid for salaries from just over €50,000 from 2027, or for masters students under 30, earning from around € 38,000. This is a slight rise from the current levels.

It is also limited at the top end to what is known as the Balkenendenorm, the top salary for civil servants and quango employees – €262,000 this year. There are around 100,000 people nationally with the “expat” ruling for skills that cannot be found locally and most Blue Umbrella clients and internationals, of course, earn nothing like this amount.

“Typically, it’s around €60,000 to €80,000,” says the Blue Umbrella adviser, who points out that this may be a family’s single salary after an international move. “Every month, the expat ruling might save €500 on the usual tax rate. And they will lose an extra 3%.”

While there is sometimes criticism of highly-skilled migrants in Dutch media for living in local housing, Blue Umbrella points out that these people are vital for the economy.

“Fewer of them are coming to the Netherlands in general because the mood is one where we say: no migrants,” he said. “But we need highly-skilled migrants. Companies are closing in the games industry and IT specialists are going to other countries that try to attract them, like Portugal.”

The tax climate is less conducive to starting a business too, he added, meaning that entrepreneurs may be less likely to choose the Netherlands. But Blue Umbrella is hopeful that there will be a greater realisation that this small country is competing for global talent.

“We are a knowledge economy, we are known for technology and trading, and you need smart people,” he said. “There’s a battle going on around the world because other countries want them too. We are known for our schools and education, the cyber war is coming, and this should be a moment of change.”

Find out more about your personal tax situation and the 27% ruling by contacting Blue Umbrella.