2027: the year of the 27% ruling
2027: the year of the 27% ruling
The 30% ruling (now referred to as Expat ruling) will change with effect from January 1st, 2027. This ruling allows employers to reimburse up to 30% of an employee’s salary tax-free to compensate for additional costs associated with working and living abroad. From 2027 onwards, this percentage will be reduced to 27%. Transitional rules will apply for certain employees. In this article, we outline the key changes and explain how employers can prepare.
The salary threshold for employees who become eligible for the Expat ruling on or after January 1st, 2027, will be:
1. Employees who qualified for the 30% ruling before January 1st, 2024
These employees may continue to benefit from the maximum 30% tax-free allowance for the remainder of their ruling period, up to a maximum of five years from the effective date stated in the ruling, or an earlier date if the employment ends before that date.
2. Employees who first qualified on or after January 1st, 2024
These employees will continue to benefit from the (maximum) 30% tax-free allowance throughout 2024, 2025 and 20261. From January 1st, 2027, onwards, the percentage will then be deducted to 27%. This percentage will then remain applicable until the end of the period stated in the ruling, or at an earlier date if the employment ends before that date.
3. New applications from January 1st, 2027, onwards
Employees who first qualify for the Expat ruling from January 1st, 2027, and onwards, will be eligible for a maximum tax-free allowance of 27%.
From January 1st, 2027: new salary thresholds and a reduced benefit
The most important changes are an increase in salary thresholds and a reduction of the maximum tax-free benefit from 30% to 27%.The salary threshold for employees who become eligible for the Expat ruling on or after January 1st, 2027, will be:
- € 50.436 (excluding the tax-free allowance), for employees aged 30 or older;
- € 38.388 (excluding the tax-free allowance), for employees under the age of 30 and holding a qualifying master’s degree.
Transitional rules
The reduced percentage of 27% is subject to transitional rules. Whether these rules apply depends on the date on which an employee first became eligible for the ruling. These situations can be possible:1. Employees who qualified for the 30% ruling before January 1st, 2024
These employees may continue to benefit from the maximum 30% tax-free allowance for the remainder of their ruling period, up to a maximum of five years from the effective date stated in the ruling, or an earlier date if the employment ends before that date.
2. Employees who first qualified on or after January 1st, 2024
These employees will continue to benefit from the (maximum) 30% tax-free allowance throughout 2024, 2025 and 20261. From January 1st, 2027, onwards, the percentage will then be deducted to 27%. This percentage will then remain applicable until the end of the period stated in the ruling, or at an earlier date if the employment ends before that date.
3. New applications from January 1st, 2027, onwards
Employees who first qualify for the Expat ruling from January 1st, 2027, and onwards, will be eligible for a maximum tax-free allowance of 27%.
How employers can prepare
- We recommend reviewing your organisation’s processes for managing the Expat ruling. If no formal process is yet in place, now is a good time to establish one. This reduces the risk of errors in both the application process and ongoing administration.
- Identify employees who qualify for the transitional rules and threshold (as described above in situation 1). These employees may be eligible for a maximum tax-free allowance of 30% after January 1st, 2027. Record the end dates of their ruling and ensure your payroll administration is informed in time and correct.
- Check whether employees who benefit from the Expat ruling as of January 1st, 2027, qualify for the new salary threshold. If they do not, there is still time for salary adjustments to preserve eligibility. Also, keep in mind the salary thresholds are subject to annual indexation based on inflation.
- Verify that payroll systems apply the correct percentage for each employee. The Expat rule is a maximum allowance (now 30%, in 2027 27%). This means that, even under the current rules, a lower percentage may be applicable, for instance if the salary of an employee does not allow the maximum percentage. In practice, we often see this is where errors occur.
