Amendments to "30% Ruling" Regime for Foreign Employees Limit Tax-Free Compensation to Amounts Realized Prior to Termination of Dutch Employment Under amendments retroactive to January 1, 2012, the Ministry of Finance revised the rules that permit foreign employees on assignment to a Dutch subsidiary or branch of a foreign company to seek a tax ruling whereby 30% of the employee's Dutch salary, including income attributable to equity compensation awards, can be paid on a tax-free basis (the "30% Ruling").
Pursuant to these amendments (which also curtail the term of any 30% Ruling from 10 years to 8 years), the 30% Ruling may be applied only to compensation realized by foreign employees during their period of service in the Netherlands and may not be applied to compensation realized after the foreign employee has terminated employment and departed the Netherlands, even if such compensation is Dutch-source income (including income realized from stock options exercised and RSUs vested after a foreign employee has terminated employment and departed the Netherlands).
Previously, the 30% Ruling applied to all Dutch-sourced compensation realized by foreign employees, including amounts that were realized following termination of employment and departure from the Netherlands but were still Dutch-sourced income (which was confirmed in a Supreme Court decision dated April 27, 2012).
Whether the amendments will apply to 30% Rulings obtained prior to January 1, 2012 is unclear, and companies with employees holding such rulings should contact their GES attorney for further consideration.
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