Transitioning from the 30% tax ruling to becoming a regular taxpayer in the Netherlands can seem daunting. However, it’s a process that many have navigated successfully. Despite changes over the past few years—reducing the duration from eight years to five years, and from 1 January 2024, limiting the compensation to 30% of your salary for the first 20 months, 20% for the next 20 months, and 10% for the final 20 months—there are practical tips to help you manage this transition smoothly.
Understanding the 30% Tax Ruling
The 30% tax ruling is a tax advantage for highly skilled migrants in the Netherlands, allowing them to receive up to 30% of their salary tax-free for up to five years. Once this period ends, you will need to pay taxes on your entire income, which can significantly impact your take-home pay.
Living Without the 30% Tax Ruling
The simplest answer to how you will survive without the 30% ruling is: you will manage like the rest of the country’s population who do not have this privilege. Many expats have successfully transitioned and continued to thrive. Here are some strategies to help you prepare:
1. Live as if You Don’t Have the Benefit
One of the best ways to prepare for the end of the 30% ruling is to live as if you don’t have it. Calculate what your net salary would be without the 30% ruling. Try to live off this amount while you still have the benefit. This practice not only helps you adjust but also allows you to save and invest the difference, creating a financial cushion.
3. Become a Two-Income Household
If possible, becoming a two-income household can significantly ease the financial burden. With both partners contributing, the impact of losing the 30% ruling is mitigated, and the household budget can remain stable.
4. Gradually Increase Disposable Income
Depending on your employer and the collective labour agreement (CLA), your salary might increase over the next few years. Aim to build your disposable income to a level where you are not relying on the 30% ruling. Promotions and salary negotiations can also help. Strive for a 10% to 15% salary increase in your third year to cushion the loss of the tax benefit.
5. Review Your Finances
Assess your financial situation thoroughly. Adjust your budget to account for the reduced income. Look for areas where you can cut costs, such as fewer weekends away or more modest holidays. Regularly reviewing and adjusting your budget will help you stay on top of your finances.
6. Negotiate a New Salary
If the end of the 30% ruling significantly impacts your finances, consider negotiating a higher salary with your employer. Prepare a strong case to justify why you deserve a pay rise, highlighting your contributions and the added financial burden you will face.
7. Explore Other Tax Benefits
Even without the 30% ruling, there may be other tax benefits available to you as an expat in the Netherlands. Make sure you understand your tax obligations and explore all options to minimise your tax liability. One important consideration is declaring your worldwide investments once the 30% ruling expires.
8. Consider Long-Term Plans
If you plan to stay in the Netherlands long-term, explore the possibility of applying for permanent residency or citizenship. This can provide greater stability and security, and potentially open up other financial and social benefits.
9. Seek Professional Advice
Consulting with a tax advisor or immigration lawyer can be helpful. They can provide personalised advice based on your specific situation and help you make informed decisions about your financial future. Professional guidance can also help you navigate the complex tax system and identify any additional benefits you may be entitled to.
Final Thoughts
Losing the 30% tax ruling might seem like a significant financial setback, but with careful planning and prudent financial management, you can adapt to this change. By living below your means, saving and investing wisely, and seeking professional advice, you can continue to enjoy your life in the Netherlands without the tax benefit. Remember, many have successfully made this transition, and so can you.
The South African Expat 