Evaluation of the 30% scheme

The 30% scheme

The 30% scheme, the tax facility for foreign employees coming to the Netherlands, is regularly in the spotlight and has been gradually tightened in recent years, mainly due to political pressure. The latest tightening was unexpectedly implemented by amendments to the Tax Plan 2024. These changes concern the change to a 30-20-10% scheme as of January 2024 and the abolition of the partial foreign tax liability as of January 2025. The scheme was previously capped at a maximum salary and the term was reduced to 5 years.

Criticism of the austerity measures of the 30% scheme

The austerity measures led to much criticism from the business community because they would have a negative impact on the Dutch business climate and on attracting foreign talent. The government therefore had an evaluation of the 30% scheme carried out.

The report "Skills, costs and choices", the evaluation of the 30% scheme

The Ministry of Finance had the extraterritorial cost scheme, the 30% scheme and the partial foreign tax liability scheme evaluated by the Economic Research Foundation (SEO). The conclusions of the study are:

1. The 30% scheme is effective in attracting knowledge migrants.

2. The 30% scheme is budgetarily efficient, with a net tax revenue of approximately EUR 128.5 million per year.

3. The partial foreign tax liability does not appear to be effective in attracting wealthy knowledge migrants.

4. The extraterritorial cost scheme (ETK scheme) has a limited incentive effect due to the already attractive employment conditions in the Netherlands and high administrative burdens.

The reduction of the tax-free allowance from 30% in the first 20 months to 20% and 10% in the subsequent 2 terms of 20 months and the abolition of the partial foreign tax liability are expected to have a negative effect. It is expected that the inflow of knowledge migrants will decrease by 10-15%, which may have negative consequences have for investments of internationally operating companies in the Netherlands. In addition, the administrative burden for users and the Tax Authorities is expected to increase The conclusion is also that the continuous adjustments to the 30% scheme have a negative effect on the business climate due to a lack of predictability and stability. The abolition of the partial foreign tax liability will hardly affect the inflow of knowledge migrants, except for a small group of high-net-worth individuals.

The Ministry of Finance will now include an alternative to the phasing out of the 30% flat rate in the 2025 Tax Plan, which will be announced on Budget Day and, if approved, can come into effect from 1 January 2025.

What does this mean for you as an employer or employee?

For employees who already used the 30% scheme before 2024, a transitional arrangement normally applies. So their tax position will not change this year. However, it is important to map out this population and inform them about the future changes if you as an employer have not done so yet. New employees as of 2024 will fall under the simplified scheme. As a result, the processing of the 30% scheme in payroll administration will become more complex. Of course, this can still change, depending on the alternative that is included in the Tax Plan 2025.