Rethinking the Dutch Expat Regime: What employers need to know

Across many jurisdictions, attracting international talent often goes hand in hand with favorable tax treatment. From flat-rate allowances to special expatriate regimes, governments compete to make relocation financially appealing for both employees and employers.

The Netherlands has long maintained a well-established expat regime, also known as the “30%-ruling”, which employers have often used as a tool to attract and retain international talent. 

At its core, the 30%-ruling allows employers to pay up to 30% of an employee’s remuneration tax-free, intended to compensate for the extra costs of working abroad. This regime provides employers with an effective and predictable framework to structure competitive remuneration packages. For internationally mobile employees, application of the regime can make a substantial difference to net income. 

However, while the concept remains straightforward, its practical application has been subject to significant change.

A Regime in Transition
In recent years, the Dutch government has gradually tightened the conditions of the 30%-ruling. Once generous in terms of both eligibility and duration, the regime has been progressively scaled back on multiple fronts.

Key developments include*:

• A reduction in the maximum duration of the ruling for new applicants from 8 to 5 years (since January 1, 2019);
• The introduction of a maximum salary base to which the 30%-ruling can be applied (since January 1, 2024, the maximum salary base in 2026 is set on € 262,000)
• The removal of certain additional tax advantages that previously applied alongside the ruling (since January 1, 2025). 

The most recent of these changes, effective as of January 1, 2025, concerns the removal of the partial non-resident taxpayer status. Previously, employees benefiting from the 30%-ruling could opt to be treated as non-resident taxpayers for certain elements of the Dutch personal income tax.

In practice, this meant that assets not clearly linked to the Netherlands, such as foreign investment portfolios, were generally excluded from Dutch taxation. This advantage is no longer available, meaning that employees are now more likely to be fully subject to Dutch taxation on their worldwide assets.  

Looking further ahead, additional changes are scheduled to take effect from January 1, 2027. From that date, the maximum tax-free portion will be further reduced, allowing employers to reimburse a maximum of 27% of the salary tax-free (instead of the current 30%). At the same time, the minimum requirements to qualify for the expat regime will be increased, meaning that a higher taxable salary will be needed to be eligible*. 

*Transitional arrangements may apply to employees already benefiting from the expat regime, depending on the specific legislative amendment and the timing of its announcement. 

What Does This Mean in Practice?
Even with these changes, the financial benefit for employees remains significant.

For example, assume an employee has an annual gross salary of € 100,000. Under the future 27% ruling, € 27,000 can be paid tax-free, leaving € 73,000 subject to Dutch wage tax.

Using an average applicable tax rate of 35%, the tax saving on the € 27,000 tax-free portion results in a net benefit of approximately € 9,500 per year. 

While the exact net benefit will depend on individual circumstances, this simple example illustrates that, even in its reduced form, the expat regime continues to provide a meaningful financial advantage compared to fully taxable remuneration.  

Practical Implications for International Employers

For global organisations, these changes have noticeable consequences. Assumptions made in global mobility policies or compensation packages may no longer hold in a Dutch context. In practice, we increasingly see situations where expectations and actual outcomes differ.

For example, an employee relocating to the Netherlands may be offered a package based on the assumption that the Dutch expat regime will apply as it did historically – with broader eligibility criteria and additional benefits beyond the tax-free portion of salary.

However, due to the recent changes, including the removal of the partial non-resident status and the upcoming reduction to 27%, the actual net benefit may be lower than expected. This can lead to budget overruns for employers or dissatisfaction for employees, particularly where expectations were set early in the process.

Broader Lessons in Global Mobility: Impact of Minor Regulatory Changes
Changes in local expat regimes, such as the recent adjustments to the Dutch one, offer an opportunity to learn about the practical impact of even minor regulatory updates. From what we observe in practice, small adjustments - if not carefully considered and communicated - can influence employee compensation, expectations, and satisfaction. While these adjustments are not likely to drastically alter global operations, they do matter in a world where talented employees are highly valued and companies are competing to attract and retain the right people.

Minor regulatory changes - such as updates to eligibility criteria or the scope of benefits under a national expat regime - may be easy to overlook at a global level, but they can create unexpected outcomes for employees if not carefully considered. Ensuring that relocation packages and mobility strategies are aligned with current local rules helps organisations avoid surprises and maintain employee trust.

For international advisory firms and their clients, the takeaway is simple: global mobility strategies should always be reviewed against the current local framework, rather than relying on past practices. Paying attention to these details helps organisations treat their employees fairly, maintain satisfaction, and support the long-term success of international assignments.