Has the 30% ruling seen its last day?
An EU citizen complaint about not being able to apply for the 30% ruling and he went to court. To the High court, to the European court of Justice and lost. However, the European court of Justice noticed an overcompensation that needs investigation. Will a lost case result in tears for all future 30% ruling applicants?
150 KM demand and discrimination
Mr Sopora lives and works in Germany. He was send by his German employer to start working in Rotterdam. Mr Sopora moved to the Netherlands and applied for the 30% ruling. His 30% ruling request was denied because he did not comply with the 150 km demand. He lived in Germany closer to the Dutch border than 150 km during a 24 month period before his first arrival in the Netherlands.
Mr Sopora was annoyed and went to court as he had the opinion he was being discriminated. The court denied his request. He continued to the Dutch high court, but the Dutch high court was not sure what to do, hence they forwarded the question to the European court of Justice.
EU court of justice: 150 km demand in 30% ruling request is not discriminatory
The European court of justice replied that within the European Union EU citizens cannot be prohibited in working and living in any place based on their nationality. However, Governments can set rules. The rule set for the 30% ruling is not based on nationality, but based on distance to the Dutch border. Hence any nationality living within this area cannot qualify for the 30% ruling. Therefore the European court decided that the 30% ruling 150 km demand is not discriminatory.
Over compensation
However, while the European court was investigating the case of Mr Sopora, they noticed that the 30% was applied regardless of the genuine expatriate costs made. The European court has the opinion that the 30% reimbursement of costs is in fact a systematic and clear overcompensation of genuine made expatriate costs. Therefore an overcompensation a regular tax payer does not have, which makes the percentage of 30% discriminatory for non 30% ruling holders that are not able to claim a reimbursement of costs not being made.
The European Court have asked the Dutch court to investigate this matter of overcompensation.
End of 30% ruling
If the Dutch court does indeed come to the conclusion that the 30% ruling leads in fact to a systematic overcompensation of expats living in the Netherlands in comparison to non expats living in the Netherlands, without a base to justify this overcompensation, then the 30% in the 30% ruling has seen its last day.
A new Mr Sopora
It is very well possible a new Mr Sopora will fight the termination of the 30% in the 30% ruling based on what is regarded systematic and clear overcompensation, what grounds are there to come to that conclusion. So that will take at least a decade to argue about. If the end conclusion is that that 30% in the 30% ruling cannot stand, the Dutch tax office will think of another method that leads to the same result. The 30% ruling is simply to important for the Dutch economy no longer to have this at their disposal.
Orange Tax Services team
We are well experienced in the field of the 30% ruling and we will be glad to assist you with the application of the ruling, with a possible dispute you have with the ruling, or assist with your salary administration to process the ruling to its best effect.
Orange Tax
