17 Sep Potential 2019 payroll amendments
The Dutch Cabinet has introduced new amendments that will be presented to The Senate of the Netherlands and House of Representative of the Netherlands on Prinsjesdag this year. These amendments will have big impact on employers and employees. The Tax Authorities has recently sent letters to inform companies about one of these amendments, namely the reduction of the duration of 30% ruling. Another amendment that has received some spotlight is the extension of paid paternity leave. Should these amendments be approved by The Senate of the Netherlands and House of Representative of the Netherlands, it will be effctive as of 1st of January 2019.
Reduction of the duration of 30% ruling
Employees who have lived 150 km outside of the Dutch boarder before the fist day of employment and receive a yearly income of more than 37.296 before tax in the Netherlands, can apply for the 30% ruling. This scheme provides a tax free allowance for the additional costs they incur for staying in the Netherlands. This allowance is 30% of their income. This scheme is intended, among other things, to attract employees from abroad with a specifi expertise that is not or scarcely found in the Netherlands.
Currently the duration of the scheme is 8 years. The current Dutch cabinet has prepared a proposal to reduce this to 5 years, which means it will be reduced by 3 years. The other conditions for the 30% ruling will not change. This proposal was a reaction to the evaluation that the research fim Dialogic had preformed in 2017. The evaluation shows that around 80% of employees do not use the scheme for more than fie years. Of the approximately 20% of the users who have used the 30% ruling for more than 5 years, a majority is not temporarily in the Netherlands but stay long-term. In addition, in neighboring countries with comparable schemes, a term of five years is applied. The research fim Dialogic therefore recommends reducing the duration of the 30% facility from 8 years to 5 or 6 years.
This amendment has not been confimed yet. It still needs to be approved by The Senate of the Netherlands and House of Representative. However, once approved, this reduction would also effct the employees who are currently enjoying the 30% ruling. For example, if the original end date were to be 01-01-2023, the new end date after the amendment will be 01-01-2020. For the employees that have reached 5 years by the 1st of January 2019, the 30% ruling will be stopped starting from that date. So for the employees who applied for 30% ruling before 01-01-2014, the 30% ruling will stop on the 1st of January 2019 if the amendment is approved by the The Senate of the Netherlands and House of Representative.
Extension of paternity leave
According to the Dutch Cabinet, the paternity leave contributes to the development of the bond between the partner and the child. The leave would also improve women’s chances on the labor market because the diffrence between the length of leave between men and women would be reduced. Currently, partners are entitled to 2 days paternity leave paid by their employer. The leave must be taken within a period of four weeks after the baby is born. It does not matter whether the employee is employed full-time or parttime. The new amendment extent the paternity leave to 5 days, which means the partners have to be paid 3 extra leave days by their employer.
According to the employer organizations VNO-NCW and MKB Nederland, employers are not that thrilled with the current plans to extent the paternity leave. The organizations do not want the employers to bare all the costs by themselves and ask the Ministry of Welfare to adjust these plans. According to the organizations, it would especially effct the smaller companies fiancially.
These amendments will be presented to The Senate of the Netherlands and House of Representative on Prinsjesdag this year. Once approved, it will take effct on the 1st of January 2019. This would mean that there will be a lot of payroll changes within a company. It is advisable that you start looking into how these changes might impact your company. Please feel free to contact us if there are any question regarding these amendments or if assistance is required.