Further changes to the Dutch expat ruling will take effect from January 2027. The maximum tax-free allowance is set to decrease from 30% to 27%, while the salary threshold will be subject to a one-time additional increase, unless applicable grandfathering provisions apply. The transitional arrangement allowing certain employees to use partial foreign taxpayer status will also end from 2027. For employers, this means reviewing the position of employees benefiting from the expat ruling and making sure payroll administration is ready for the changes.

What Is Changing from January 2027?

The Maximum Allowance Will Reduce from 30% to 27%

From 1 January 2027, the maximum tax-free allowance under the expat ruling will decrease from 30% to 27%.

Grandfathering rules may apply to those employees for whom the 30% ruling was applied ultimately in the last payroll period of 2023. This means that the 30% allowance can continue to apply to certain employees who meet the relevant conditions. The position therefore needs to be assessed for each employee rather than applying the 27% rate across the board.

The Salary Threshold Will Increase

The salary threshold for the expat ruling will be subject to a one-time additional increase from 2027 of roughly 9.4%.

Grandfathering rules may apply to those employees for whom the 30% ruling was applied in the payroll in 2024 in which case there is no change other than the common annual indexation of the current salary threshold. Employers will therefore need to check which salary threshold applies to each employee when preparing for the 2027 payroll year.

Partial Foreign Taxpayer Status Will End

The transitional arrangement allowing certain employees to use partial foreign taxpayer status will end from 2027.

Employees for whom the expat ruling was applied in the last payroll period of 2023 can continue to use partial foreign tax liability until the end of 2026 under the transitional arrangement. From 2027, this will no longer be available to those employees.

This means affected employees will no longer receive the partial foreign taxpayer treatment that previously applied to income from substantial interests and savings and investments. For US nationals living in the Netherlands also no foreign workday exclusion is allowed anymore.

What Does This Mean for Employers?

The impact of these changes will depend on the individual employee and how the expat ruling has been applied through payroll foremostly.

Employers should review, for each relevant employee:

  • which salary threshold applies;
  • whether the employee remains eligible for the 30% allowance or will move to the 27% allowance;
  • whether the relevant grandfathering provisions apply; and
  • whether the end of partial foreign taxpayer status affects the employee’s personal tax position.

The position can be particularly difficult to establish where an employee previously worked for another employer and benefited from the expat ruling during that employment. Additional research may be required, particularly where the expat ruling was established in the last payroll period of 2023 and/or 2024, the details of which are just a little different for each 3 changes. Additional challenges could apply when an employee has not benefited from the ruling continuously.

Preparing in advance will give employers time to establish the correct position, make any necessary payroll changes and communicate with employees who may be affected.

Where the changes will have a negative impact on an employee, informing them in advance can also help avoid unexpected changes to net pay and difficult conversations later.

How Can LIMES Help?

At LIMES, we recommend reviewing the position of each employee benefiting from the expat ruling ahead of the 2027 changes.

When assisting with expat ruling applications over the past 1.5 years, we have prepared and shared an overview for clients covering the applicable legislation, regulations and relevant transition measures. Based on the information provided by the employee, this also identifies, where possible, which grandfathering provisions apply.

Where an application was not handled by LIMES, the employee’s position may not yet have been established. This can be particularly relevant for employees who previously worked for another employer where the expat ruling was applied, as additional research may be needed.

We can also help employers review the applicable salary threshold, maximum expat ruling allowance, tax treatment of extraterritorial costs and the impact of the changes on payroll administration.

Contact our LIMES international experts for support reviewing the 2027 expat ruling changes and their impact on your employees and payroll.