The taxable moment determines whether the 30% ruling can be applied. Once it is established that the 30% ruling indeed can be applied, the question arises as to what the basis of the 30% allowance is.
Recently, the Knowledge Group International Tax Law for individual income tax has taken a position on the application of the 30% ruling in the payroll administration when the 30% ruling duration period ends during the month (wage period). This applies to situations in which the maximum duration period (maximum 5 years) has ended, which is the end date as stated in the 30% ruling granting letter.
The position can be summarized briefly as follows for 2 situations, for sake of convenience we assume a monthly wage period.
1. Duration period ends before taxable moment
If the 30% ruling ends before the payday, the 30% ruling cannot be applied at all in that wage period (in this case, a month) because the taxable moment of the income is after the end date of the 30% ruling duration period. This is regardless of the fact that part of the income was earned during the period of the 30% ruling.
2. Duration period ends between taxable moment and last day wage period
If the 30% ruling duration period ends after the payday, the 30% ruling can be applied in that month, but only to the income relating to the work days during the 30% ruling period. Therefore, the income must be divided into (i) a part attributable to the period in the month that still falls within the 30% ruling duration period and (ii) the remaining part of that month. Except for situations that justify a different allocation, reference is made to article 25 of the Wage Tax Act 1964 for the allocation of the income. This article specifies a year as 260 days and a month as 21.67 days (65/3).
The fact that the 30% ruling must be applied on a pro rata basis when the duration period ends between the taxable moment (payday) and the last day of the wage period makes payroll processing for employees with the 30% ruling more complex. Also, the prescribed work day fraction that is not based on actual social security days can make payroll processing particularly complicated and may require manual exercise. How to deal exactly with work day fractions in exceptional cases may still lead to various questions.
In practice, payroll processing for employees with the 30% ruling is becoming increasingly complex, partly due to various changes in legislation and regulations, case law, and also published positions of the authorities. Naturally, we are happy to assist with a wide range of questions on this topic.