Alimony and 30% tax ruling
Door: Magali van Maanen
Are you eligible for the 30% tax ruling? And do you pay alimony for an ex-spouse or your children? Or perhaps you receive alimony from an ex-spouse who enjoys the 30% tax ruling? Then there is important news for you!
The current administration has evaluated the 30% tax ruling and intends to shorten the applicability of the ruling from 8 to 5 years. They propose to make this change as of January 1st, 2019. Important to know, is that the new term of 5 years will not only apply to “new” cases, but for all those enjoying the 30% tax ruling. So you shall be affected too.
Being able to use the 30% tax ruling leads to a higher net disposable income per month. In summary: the employee is not liable for taxes over 30% of his/her income. The taxes are calculated over the remaining 70% of the income and the 30% is added as a net income. When the 30% ruling expires, the employee must pay taxes over the full salary. Consequently, the net disposable income will be lower.
So how does this affect the alimony? When calculating child- and/or spousal support according to Dutch law, there are two things to keep in mind: need and capacity to pay. Need is the funds the person seeking maintenance requires, to pay for all his/her expenses. Capacity to pay is whether, and if so how much, funds the other spouse has available to fulfil that need. The basis for calculating the capacity to pay, is the net disposable income. If the net disposable income changes, this will have direct effect on the capacity to pay.
So if the 30% ruling is shortened this could mean that an alimony debtor is suddenly cut off from the tax benefit. The net disposable income will be considerably lower, which will have a major impact on the capacity to pay. The person paying maintenance will most likely request a revision of the alimony, as he/she can no longer continue paying the original amount. For the person receiving maintenance, this can lead to a considerable drop income.
If you are currently enjoying the 30% tax ruling and conducting negotiations for divorce or (revision) of alimony payments, it is important to address when your 30% tax ruling ends. Considering the (potential) new rule, this could be much quicker you thought. It can be wise to calculate the alimony payments without the 30% ruling, so that both the spouse seeking maintenance as well as the spouse paying alimony know what to expect in future. This can prevent difficult discussions and unwanted surprises in future.