30% ruling: statutory reduction and transitional rights not unlawful

The Supreme Court has confirmed that the reduction of the maximum term of the 30% ruling from eight to five years, as well as the accompanying limited transitional rights, is lawful. The case concerned an employee who had been issued a 30% ruling decision in 2012 with a duration until the end of November 2021. However, as a result of the legislative amendment and the transitional law, the application of the ruling ended as early as 1 January 2021.

The Supreme Court has ruled that the amendment to tax legislation, including the choices made by the legislature regarding transitional law, fall in principle within the broad margin of discretion afforded to the legislature. Only if the legislature acts in a clearly unreasonable manner, there can be room for judicial intervention.

Furthermore, the Supreme Court confirms the principle that the court may not review a law in a formal sense against general legal principles, except in special circumstances that were not taken into account by the legislature. No such exceptional circumstances exist in this case.

It is also important that the Supreme Court explicitly states that it is not decisive for this assessment whether the legislator has sufficiently investigated the consequences for specific groups or whether the reasoning is “adequate”. Such points cannot lead to a formal law being left inapplicable.

The complaints based on property rights (Article 1 of the First Protocol to the ECHR) and on prohibitions of discrimination are also unsuccessful. The restriction of the 30% ruling with a limited transition period remains within the discretion of the legislator.

The Supreme Court confirms that the legislator has considerable discretion when reducing tax incentives and designing transitional law, as a result of which older 30% rulings do not guarantee utilisation until the originally stated end date.

As a result, the statutory regime and transitional law take precedence, meaning that in many “old” cases the scheme ended on 31 December 2020, even if the decision stated a later end date.