February 2, 2024

30% ruling overhaul raises concerns for Dutch tech startups facing talent shortages

The Netherlands, known for its welcoming stance towards international talent, is undergoing a significant shift in its tax policies that could impact its ability to attract global professionals. The 30% ruling, once a cornerstone of financial support for highly skilled international talent, is undergoing a comprehensive overhaul that took place on January 1, 2024. This change comes at a challenging juncture as Dutch tech startups grapple with growth hurdles and talent shortages. With a crucial role played by international talent in the workforce, particularly in the tech sector, the impact of these tax adjustments raises questions about the continued appeal of the Netherlands as a destination for skilled professionals. As Dutch startups face challenges in filling tech-related positions, the effectiveness of these policy changes will likely be closely monitored, with potential repercussions for the broader Dutch business climate.

Set back in attracting global talent

The 30% ruling is a tax advantage for highly skilled international talent in the Netherlands. Previously, an employer could pay up to 30% of the salary of an expat employee with the 30% status free of tax. Despite this, the 30% ruling, which has been a financial support net for international talent and a way to fill missing gaps in the Netherlands’ job market, is getting an extensive overhaul.

Before, expats did not have to pay taxes on 30% of their income while living in the Netherlands. Starting January 1, 2024, this ruling will have a cap at €233,000 (a.k.a. the ‘Balkenende-norm’), and how much tax break international workers are afforded will gradually drop over 5 years.

What does the new 30% ruling entail? For the first 20 months of living in the Netherlands, 30% of their income (up to €233,000) will be tax-free. After that, for the next 20 months, this tax break will slim down to 20%, and then for the following 20 months, it goes down even further to 10%. Once an expat has lived in the Netherlands for 5 years, their entire income will be fair game for taxation.

The new 30% ruling comes at a tricky time as the new government moves forward on cutting back tax breaks for international talent, and Dutch tech startups encounter obstacles in their growth journey.

Dutch tech startups face growth hurdles and talent shortages

Techleap’s most recent edition of the Dutch Tech Startup Employment Report – created in collaboration with Dealroom.co, CBRE and Ravio – showcases how and why tech startups play a vital role in the Dutch Economy and how the Dutch startup employment landscape has changed throughout 2023.

According to the report, Dutch VC-backed startups play a crucial role in supporting a workforce of 151,000 jobs, and there is ample room for more growth. While these startups have expanded their staff over the past year, hiring pace and headcount growth has significantly slowed, except for startups founded in 2018.

Along with the slowing growth rate for Dutch startups, filling positions for tech-related jobs poses a persistent challenge for founders, with 91 open vacancies for every 1000 professionals in the field of Engineering.

The Netherlands stands out for its focus on beefing up their development teams, outpacing trends seen in other countries. A whopping 25% of the job opportunities listed on Dealroom x Techleap’s Dutch tech ecosystem platform are in development. Adding to this trend, there’s a substantial demand for roles in Sales, making up 21%, and Marketing & Communication, making up 16% of the available job openings. These positions play a crucial role in the grand scheme of things, steering the scaling and expansion strategies of these startups.

Could this be an opportunity for international talent to come in and fill these roles? And if so, will the new 30% ruling deter expats from calling the Netherlands their new home?

Can Dutch startups keep international talent invested?

Dutch tech startups thrive on international talent, with over 29% of their workforce being international. Another notable contribution comes from foreign postgraduate alumni, who have founded over 100 startups in the Netherlands. These startups have already gone to raise over €50M and created 500 jobs in the Netherlands. It’s clear that international talent not only brings value to the Dutch tech ecosystem, but it increases the value as well.

Despite what some critics of the original 30% ruling may feel, the tax break has been beneficial for both international talent and filling up gaps in the Netherlands’ job market. In a 2017 evaluation of the original 30% ruling by independent research and consultancy agency, Dialogic, it has shown that the tax break did not lead to crowding out in the labour market and is effective in keeping the Dutch business climate attractive and competitive.

Attracting international talent is crucial to overcoming labour shortage in the Dutch tech ecosystem. While changes to the new 30% ruling cannot be changed this year, the government will reevaluate the policy changes before this summer depending on how well they perform in terms of efficiency and efficacy.

Dutch Tech Startup Employment Report 2023

To learn more about how the Dutch startup employment landscape has changed throughout 2023, you can download the report by clicking here. 👈

Subscribe to our newsletter

Techleap is a non-profit organisation, funded by the Ministry of Economic Affairs and Climate Policy, helping to quantify and accelerate the tech-ecosystem of the Netherlands. Constantijn van Oranje is Special Envoy of Techleap.