A] Prelude
Even if the 30% ruling has been applied retroactively in the payroll administration in 2022 or 2023, the employee is still subject to the transitional tax law.
The Dutch Tax Authorities announced this in their latest position in the series on transitional law and the application of the Dutch 30% ruling. Transitional law applies both to the reduction and capping of the 30% ruling and to the abolition of the partial foreign tax liability.
B] Does the transitional law apply to a retroactive correction?
Whether the transitional law applies depends on whether the 30% ruling was applied in the last wage period of 2022 or 2023.
In certain situations, based on the recently published Decree on correction of the 30% scheme, a wage period may be corrected retroactively by means of a correction message.
The question was therefore whether, in the event of a retroactive correction, the 30% ruling would have been enjoyed in the last wage period. Yes, is the answer from the Tax Authorities. Even after correction, the compensation for the application of the transitional arrangements in the period in question has been received.
C] When does which transitional law apply?
The following periods are relevant for the transitional arrangements:
• Capping of the 30% scheme as of January 1, 2024 up to the WNT standard
Transitional law applies, meaning that the cap will apply to employees from 1 January 2026 if:
o 30% ruling has been applied for that employee for the last pay period of 2022;
o the employee is an incoming employee without interruption after December 31, 2022.
• Retrenchment from 30% scheme to a 10% scheme as of January 1, 2024
Transitional law applies, whereby the retrenchment does not apply to employees if the 30% ruling has been applied to that employee for the last payroll period of 2023.
• Abolition of partial foreign tax liability as of January 1, 2025
Transitional law applies, whereby the partial foreign tax liability for employees can be used until December 31, 2026 if:
o 30% ruling has been applied to that employee for the last pay period of 2023;
o the employee is an incoming employee without interruption after December 31, 2023.
The transitional law only ends when the 30% ruling is interrupted. The timely change of withholding agent (whether or not within a coherent group of withholding agents) and the transfer of the company are not considered an interruption. In that case, the employee remains subject to the transitional law.
D] A Final Detail
If the last wage period of 2022 or 2023 falls within the application period for the 30% scheme and the actual extraterritorial costs have been reimbursed to the employee in that month or the 30% scheme has not yet been applied, this can still be restored by means of a correction message, if the conditions of the decision are met. The transitional law will then still apply.