The 30% ruling and the 150 km rule: Sopora (CJEU C-512/13, HR 2016:360) and the moment of testing (HR 2018:2201)

The judgments

The question

The Dutch 30% ruling allows an employer to pay an employee recruited from abroad a tax-free allowance for “extraterritorial costs” – the extra costs of a temporary stay outside the country of origin – fixed at a flat rate, without proof of what was actually spent. Since 1 January 2012 the ruling has been reserved for employees who, for more than two thirds of the 24 months before they started work in the Netherlands, lived more than 150 kilometres from the Dutch border. In the government’s own description, the condition excludes employees who lived in Belgium, Luxembourg, western Germany and a limited part of northern France, whatever their actual costs; employees from further afield qualify without having to show any.

Two questions followed. First, is it compatible with the free movement of workers to give a tax advantage to workers from some Member States and deny it to workers from neighbouring regions? The Court of Justice answered that in Sopora (C-512/13), and the Supreme Court (Hoge Raad) applied the answer in its final judgment of 4 March 2016. Second, at what moment is the 150 km condition tested, and what happens to an employee who signed a contract before the condition existed but started work after it came into force? The Supreme Court answered that on 30 November 2018. Both points matter to employers who recruit across the Belgian and German borders, to HR and mobility teams planning start dates and relocations, and to employees deciding where to live before they move.

The legal framework

The version the judgments apply

All three disputes concern the 2012 rules. In the version applied in Sopora, Article 31a(2)(e) of the Wage Tax Act 1964 exempted reimbursements for extraterritorial costs and allowed an order in council to provide that, for employees recruited from outside the Netherlands, reimbursements for a stay outside the country of origin “for no more than eight years” are in any event regarded as reimbursement of extraterritorial costs up to 30% of a designated part of the wages (Supreme Court, 9 August 2013, para. 3.3.2; Court of Justice, para. 4). The 2011 text, quoted by the Advocate General in 2018, said ten years rather than eight (conclusion of 5 September 2018, point 4.1), and the District Court of The Hague recorded the same change in the maximum duration in Article 10ec(1) of the Implementing Decree (“no more than ten years [2012: eight years]”, judgment of 23 June 2017, para. 14).

The detail sits in Chapter 4a of the Wage Tax Implementing Decree 1965. Under Article 10ea(1), at the joint request of employee and withholding agent, reimbursements to an “incoming employee” are in any event treated as reimbursement of extraterritorial costs up to 30% of the base; this is the evidentiary rule (bewijsregel). The base is essentially the wages for the stay outside the country of origin plus the tax-free reimbursement itself (Supreme Court, 9 August 2013, para. 3.3.3). Article 10e(2)(b) defined an incoming employee. Until 31 December 2011 it covered an employee recruited from another country, or sent to a withholding agent, “with specific expertise that is not available or is scarce on the Dutch labour market”. The Decree of 22 December 2011 (Stb. 2011, 677, Article II, part D) split the definition in two and added point 2°: an employee “who, for more than two thirds of the period of 24 months preceding the start of the period of employment in the Netherlands, lived at a distance of more than 150 kilometres from the border of the Netherlands”, excluding the territorial sea and the exclusive economic zone (The Hague Court of Appeal, 19 December 2017, para. 7.3; for the exclusion, District Court of Breda, para. 4.1). The distance is measured as the crow flies (Supreme Court, 9 August 2013, para. 3.3.4).

Two features of the system run through every judgment. First, an employee outside the 30% ruling can still receive his actual, proven extraterritorial costs tax-free under the general exemption in Article 31a(2)(e). Second, an employee inside the ruling can claim more than 30% if he proves higher actual costs. The flat rate therefore never works against the employee; it only spares him the proof and allows him to keep any surplus (Supreme Court, 9 August 2013, paras 3.3.7–3.3.8 and 3.3.11).

The 2011 Decree also contained transitional law. Article IV kept the old Article 10ee in force for employees to whom the evidentiary rule was being applied on 31 December 2011 and for whom no more than five years of the duration had elapsed, so that they were tested against the new criteria, the 150 km test included, only at the start of the sixth year; where more than five years had elapsed, no further test applied for the rest of the duration in the decision (The Hague Court of Appeal, paras 7.5–7.6, quoting Stb. 2011, 677, pp. 53–54). Article XXIII brought the amendments into force on 1 January 2012 (para. 7.13).

Our current translated text

The 150 km wording has not changed. The Dutch text of Article 10e(2)(b)(2°) of the Implementing Decree in our current source is word for word the 2012 text quoted by the courts. Around it, however, much has moved, and the following differences are visible in our translations:

• The 30% delegation is no longer in Article 31a(2)(e). It is now Article 31a(8) of the Wage Tax Act 1964, which limits the period to “no more than five years” and caps the amount taken into account per employee at 30% of the maximum remuneration under the Senior Officials in the Public and Semi-Public Sector (Standards for Remuneration) Act. The status note in our translation records that the Tax Plan 2025 removed a 30%/20%/10% phase-out from the Act with effect from 1 January 2025 and replaces “30%” by “27%” with effect from 1 January 2027.
• Article 31a(2)(e) still exempts extraterritorial costs, but now excludes living expenses and the cost of private telephone calls for the period in which the employee works in the Netherlands.
• Article 10ea(1) of the Decree in the consolidation in force from 1 January 2026 still sets out stages of 30%, 20% and 10% of the base, each for no more than 20 months; our status note flags that this no longer matches the Act after 1 January 2025.
• Article 10ec(1) now gives a maximum duration of five years, beginning on the first day of employment by the withholding agent.
• Article 10e(4) disapplies the 150 km condition where the employee met it for an earlier period of employment in the Netherlands that began no earlier than five years before the new one, and Article 10e(3) disregards, for a PhD holder whose employment begins within one year of obtaining the doctorate, the period spent in the Netherlands or within 150 km of its border to obtain it, in assessing whether the employee is recruited from another country. Neither rule appears in the 2012 text quoted in the judgments.
• “Specific expertise” is now filled in by salary thresholds in Article 10eb (€48,013, or €36,497 for holders of a master’s degree under 30, in our current text). The salary norm itself was introduced on 1 January 2012 at €35,000 (conclusion of 5 September 2018, point 4.12).

Read the judgments with that in mind: the principles on EU law and on the moment of testing concern a condition whose wording is unchanged, but the numbers around it (eight years, a flat 30% with no ceiling) are no longer the law.

Why the 150 km rule was introduced

The District Court of Breda set out the legislative history at length (judgment of 8 November 2012, paras 4.1–4.5), and the Supreme Court summarised it (9 August 2013, paras 3.3.9–3.3.10). The Tax Plan 2012 announced four measures to “target” the 30% ruling better, because it was being used more widely than intended. One was the 150 km zone. Employees living within that radius could be assumed to commute and so to have only marginal extraterritorial costs; a 30% flat rate gave them an unjustified advantage over employees living in the Netherlands with comparable qualifications and a comparable commute. In the border region, foreigners entitled to the ruling were said to be preferred over Dutch candidates of the same quality. The government acknowledged that an absolute limit “has a certain coarseness” (een zekere grofheid), and that the actual travel distance can be considerable depending on where in the Netherlands the employer is located. It rejected a lower limit of 100 km because it would leave room for unintended use, and rejected a test based on the distance between home and place of work because it would be hard for the tax authorities to apply and enforce, for example for an employee who works at several offices in a week. It also said that it could not grant the ruling to border residents who move to the Netherlands, because that would distinguish between someone moving to Lanaken in Belgium and someone moving to Eijsden in the Netherlands to work in Maastricht. Workers excluded were those who lived in Belgium, Luxembourg, western Germany and (a limited part of) northern France before starting work.

Sopora: the facts and the District Court of Breda

Mr Sopora, born in 1972, worked for an employer in Germany. From 1 February 2012 to 31 December 2012 he was placed with an associated company in the Netherlands (Rotterdam, according to the District Court). In the 24 months before he started, he lived in Germany, less than 150 km from the Dutch border, and he stayed there; he rented a flat in the Netherlands for his weekday stays (District Court, paras 2.1–2.2; Supreme Court, 9 August 2013, paras 3.1.1–3.1.2). He requested the 30% ruling on 26 March 2012. The inspector refused on 11 April 2012 because he did not meet the 150 km condition, and upheld the refusal on objection on 22 May 2012.

Before the District Court of Breda, Mr Sopora argued that the 150 km limit infringed EU law and the equality principle in Article 26 ICCPR and Article 14 ECHR. The single judge left open whether there was unequal treatment of equal cases, because there was an objective justification in any event: to curb unintended use, the legislator could reasonably redraw the circle of employees covered so that the ruling matched its original purpose more closely. The measure pursued a legitimate aim of general interest and did not go further than necessary, particularly as excluded employees could still receive their actual extraterritorial costs tax-free. The court rejected the argument that this was an anti-abuse measure, and held that the coarseness of the limit had been considered in Parliament and a refinement consciously abandoned for practical reasons, so the 150 km limit was not arbitrary (para. 4.8). The ECHR and ICCPR complaint failed on the same reasoning, given the wide margin of the tax legislator (paras 4.10–4.11). The appeal was dismissed, with no order for costs. Mr Sopora appealed in cassation directly to the Supreme Court.

The Supreme Court’s reference: HR 9 August 2013

In its judgment of 9 August 2013, the Supreme Court disposed of the second ground of appeal itself. Article 26 ICCPR, Article 14 ECHR and Article 1 of Protocol No. 12 prohibit only unequal treatment lacking a reasonable and objective justification, and the tax legislator has a wide margin; the 150 km criterion was “somewhat coarse” but stayed within that margin, and given the disadvantages of the alternatives it could not be said to lack reasonable grounds (paras 3.12.1–3.12.3).

On EU law the Court was less sure. It started from the point that the 30% ruling grants foreign recruits an advantage that residents do not get; an incoming employee is never treated worse than a resident, and the Decree draws no direct distinction by nationality (paras 3.5–3.6.2). The 150 km criterion does, however, distinguish between residents of different Member States, and it may be assumed that nationals of certain Member States are in particular excluded (para. 3.6.3). Whether Article 45 TFEU prohibits such a distinction between nationals of other Member States was not settled by Orange European Smallcap Fund (C-194/06) or D (C-376/03) (para. 3.6.5). It was arguable that border residents and more distant residents are not comparable, because the legislator assumed that the former have few or no extraterritorial costs. But the Court doubted that assumption could be followed: nothing in the file showed it rested on empirical research, and in part of the excluded cases the travel distance to the place of work in the Netherlands will exceed 150 km (paras 3.6.6–3.6.7). Even if there were no indirect discrimination, there might be an obstacle: an employer who wants to give a recruit a certain net amount will find it cheaper to hire someone from beyond 150 km (para. 3.7.3).

On justification, the Court considered that facilitating the movement of workers, and avoiding disputes about the amount of extraterritorial costs, is an overriding reason in the public interest, and that bringing the ruling back to that purpose while avoiding distortions of competition in the border region would also qualify (paras 3.8.2–3.8.3). The 150 km criterion was suitable (para. 3.10.1). The difficulty was proportionality: the criterion also excludes employees who cannot reasonably commute daily and so face significant costs (para. 3.10.2). The Court put the question in terms that later shaped the whole case:

The case law of the Court of Justice does not make clear what standards apply when assessing the proportionality of a measure that […] uses a generally formulated, easily applied criterion, so that the distinguishing or restrictive rule also applies in cases where that is not strictly necessary […]. Can coarseness of the distinguishing criterion also be accepted if, in a considerable part or even the majority of the cases affected by it, the rationale of the rule gives no reason for it?

It added that administrative considerations alone cannot justify a derogation from EU law (Terhoeve, C-18/95), but that the question here was whether practicability may be weighed in assessing whether a legitimate aim is pursued proportionately (para. 3.10.7). It referred three questions: whether there is an indirect distinction based on nationality or an obstacle requiring justification; if so, whether the rule is based on overriding reasons in the public interest; and if so, whether the 150 km criterion goes further than necessary.

Advocate General Kokott: a strict test for a simplifying rule

Advocate General Kokott delivered her opinion on 13 November 2014. She considered that Article 45(2) TFEU, unlike Article 7 of Regulation 492/2011, prohibits “any discrimination based on nationality between workers of the Member States”, and so also differentiation between non-residents of different Member States: support for workers from only certain Member States worsens the competitive position of workers from the others (points 22–30). Only residents of Belgium, Germany, France, Luxembourg or England can fail the condition on geographical grounds; residents of all other Member States always satisfy it (point 19). Workers living just inside and just outside 150 km are comparable, their costs differing only in degree (points 33–34).

She rejected tax avoidance as a justification, since Mr Sopora created no artificial arrangement (point 40), and doubted that protection of Dutch workers was needed, because the ruling applies only where no adequate candidate can be found on the Dutch labour market (point 43). The aim of preventing excessive advantages and distortions of competition among non-resident workers could, in principle, justify the condition (point 47). A simplifying rule is permissible, and isolated misfits are inherent in it, but it is proportionate only if it leads “in the vast majority of cases” to the result that would have been reached without the simplification (points 54–55). She doubted that the 150 km condition met that standard: the distance to the border has limited meaning in a country about 300 km long and 180 km wide, and it is the distance to the place of work that decides whether someone commutes (point 57). The Netherlands’ objection that places of work can be hard to determine seemed to her comparatively minor, not least because, as the Commission stated without contradiction at the hearing, distance is checked only once, at the start of the activity in the Netherlands (point 58). She also suggested a reduced flat rate for border residents instead of total exclusion (point 60). Her proposed answer made the rule compatible with Article 45 TFEU only if, in the vast majority of cases, border residents can commute daily and essentially incur no extraterritorial costs (points 62–63).

The Court of Justice: Sopora (C-512/13)

The Grand Chamber gave judgment on 24 February 2015. It took the three questions together (para. 20). It confirmed that Article 45 TFEU prohibits covert discrimination by criteria such as residence, and that, read with Article 26 TFEU, it “also prohibits discrimination between non-resident workers if such discrimination leads to nationals of certain Member States being unduly favoured in comparison with others” (paras 23–25). It also noted that most Belgian workers and some German, French, Luxembourgish and United Kingdom workers are excluded (para. 31).

The Court then took a different path from its Advocate General. It stressed the objective of the scheme: to facilitate the movement of workers who are liable to incur additional expenses by accepting employment in the Netherlands (para. 26). The flat-rate rule never operates to the disadvantage of the workers concerned (para. 28), all non-resident workers can obtain an exemption for actual costs, and what is reserved for those beyond 150 km is “the administrative simplification” of the claim (paras 29–30). It is inherent in a flat-rate advantage that some workers outside its scope will also meet the material conditions and must then prove their entitlement (para. 32). While administrative considerations cannot justify a derogation from EU law, Member States may pursue legitimate objectives through rules that are easily managed and supervised (para. 33). The key passages are:

The mere fact that limits are set concerning the distance in relation to the workers’ place of residence and concerning the ceiling of the exemption granted, taking as the starting point the Netherlands border and the taxable base, respectively, even though, as the referring court states, this is necessarily approximate in nature, cannot therefore, in itself, amount to indirect discrimination or an impediment to the free movement of workers.

The position would, however, be different if — and this is a matter for the referring court to ascertain — those limits were set in such a way that the flat-rate rule were systematically to give rise to a net overcompensation in respect of the extraterritorial expenses actually incurred.

The operative part repeats that test (para. 36). The costs of the proceedings were left to the Supreme Court (para. 37). Two points are worth noting. The Court did not decide whether the two groups were comparable or whether there was a justification; it treated the approximate limits as not, in themselves, discriminatory, and moved the scrutiny from the excluded group to the favoured group: the question is whether those who receive the flat rate are systematically overcompensated. And the English text says “net overcompensation”, whereas the Dutch text, the language of the case, says duidelijke overcompensatie (“clear overcompensation”), as quoted by the Supreme Court in its final judgment (para. 1); the Advocate General noted that the French version uses nette, which he read as “clear, distinct, observable” (conclusion of 29 September 2015, point 5.18). The Dutch courts applied the “clear” reading.

The Advocate General’s further opinion: what “systematic and clear” means

After the Court’s ruling, Mr Sopora asked the Supreme Court to refer again, arguing that the Court had misunderstood the objective of the ruling (which, in his view, is to facilitate the recruitment of scarce staff) and that the task given to the national court was incomprehensible and impossible to perform. He also relied on data from his adviser’s client portfolio. The State Secretary argued that the 150 km limit was introduced precisely to remove excessive reimbursement and that overcompensation had never been argued below (conclusion of 29 September 2015, points 3.1–4.5).

Advocate General Niessen’s further conclusion is the most detailed treatment of the Court’s test. He saw no need for a new reference: the Supreme Court had already told the Court that the ruling had partly become a wage-cost subsidy (point 3.3). Reading “systematically” as “methodically” or “in a planned way”, he understood the Court to ask whether overcompensation is built into the rule itself, and “clear” as requiring that it be readily observable that 30% of the base systematically exceeds the costs (points 5.13–5.20). In his view the Court was asking mainly what the legislator intended, with a marginal check of whether the legislator’s assumptions were realistic, judged on current data (points 5.21–5.22 and 8.3). He considered this a question of law about the validity of the rule in general, not a fact in the procedural sense; the Supreme Court could examine it itself on the basis of facts of common knowledge, without the rules on the burden of proof (points 7.4–7.5 and 7.13). He left aside Mr Sopora’s argument about the option for partial non-resident taxation under Article 2.6 of the Income Tax Act 2001, because Mr Sopora was a non-resident taxpayer in 2012 anyway and had no interest in it (points 3.8–3.9).

His review of the legislative history went back to 1970. The Netherlands Court of Audit’s report for 1975 recorded the State Secretary’s statement that data from a survey of companies showed costs approaching the then 35% deduction (point 9.3); the rate was reduced to 30% from 2001 because 35% had proved sufficient in many cases, the State Secretary adding that a flat rate is by nature too high for one taxpayer and too low for another (point 9.8). He set out the repeated parliamentary attempts to cap the ruling, including figures for 2002 (about 32,000 employees, €325 million, 600 of them earning more than €250,000; points 9.7 and 9.25), and the government’s consistent refusal (points 9.15–9.35). His conclusion was that the flat rate was set on the generous side, but that no intention of systematic and clear overcompensation appeared (points 9.14 and 9.38).

He then ran model calculations, using only the two main cost items, housing and trips home, and taking Amsterdam, Rotterdam and The Hague as places of work (points 11.2–11.9). Employee A had a total gross income of €70,000 (€49,000 wages plus €21,000 allowance); employee B €250,000 (€175,000 plus €75,000). For an employee who keeps a family home abroad and rents in the Netherlands, costs came to 49.7% of total income for A and between 27.8% and 32.6% for B. For an employee who moves to the Netherlands, alone or with family, where housing counts only above 18% of wages under the policy decree of 11 February 2004, the figures ranged from 24.3% (A, single) and 32% (A, with family) down to 8% (B, single, Rotterdam or The Hague) (point 11.46). Daily commuting from beyond 150 km would lead to overcompensation, but hardly occurs in practice (points 11.11–11.12 and 11.47). Overcompensation appeared for high earners, but they were a very small group; in 2002, 94% of users earned €150,000 or less (point 11.49). He concluded that both grounds failed (points 11.51–11.54).

The Supreme Court’s final judgment: HR 4 March 2016

In its judgment of 4 March 2016, the Supreme Court followed the Advocate General. It read paragraph 34 of the Court’s ruling as meaning that the limits of 150 km and 30%, “even though these limits necessarily have a certain coarseness”, do not in themselves cause indirect discrimination or an obstacle (para. 2.1). It then framed the test:

This means that, in assessing whether the 30% ruling may be contrary to Article 45 TFEU, it is not decisive that clear and structural overcompensation could occur in individual cases. What is decisive is whether the 30% ruling systematically has the effect that employees are clearly overcompensated.

It derived this from paragraphs 28, 29 and 34 of the Court’s judgment: that the scheme never works to the employee’s disadvantage, that it is coarse, and that overcompensation is inherent in it, are each compatible with EU law (para. 2.2). On the facts, the Court relied on the legislative history in the Advocate General’s conclusion: the finding that costs after a posting to the Netherlands are considerably higher than for a resident employee, the survey showing extra costs approaching 35% of wages, the reduction to 30% by the Decree of 20 December 2000 (Stb. 2000, 640) because that rate proved sufficient in many cases, and the 2012 restriction for border residents. From this it inferred that the limits were based on factual research, were set relatively recently, had been reconsidered several times and had been aimed at matching actual costs (para. 2.3). The Advocate General’s research did not show systematic clear overcompensation in practice. The Court added two arguments of its own. The Court of Justice’s test concerns only incoming employees who lived more than 150 km from the border; they may be assumed to have higher costs than incoming employees in general, for whom the 30% level was originally set, so overcompensation is less likely in their case. And while a fixed percentage of wages may lead to overcompensation at (very) high salaries, that does not make it systematic (para. 2.3).

The first ground therefore failed (para. 2.4). The request for a new reference was refused, because an answer to other questions was not necessary to decide the case (para. 2.5). On the second ground, the Court referred back to its 2013 judgment (para. 2.6). There was no order for costs and the appeal in cassation was dismissed (paras 3–4). Mr Sopora therefore remained outside the 30% ruling for 2012, with only the possibility of a tax-free reimbursement of proven actual costs.

The moment of testing: the facts and the lower courts

The second line concerns a different German resident. On 22 December 2011 he concluded an employment contract with a Dutch employer, starting on 1 January 2012. In the 24 months before 1 January 2012 he lived in Germany within 150 km of the border. On 16 August 2012 he and the employer jointly requested the 30% ruling with effect from 1 August 2012; the inspector refused on 10 October 2012 under Article 10e as in force from 1 January 2012 (The Hague Court of Appeal, paras 3.1–3.4). The objection was dismissed on 22 March 2016 (conclusion of 5 September 2018, point 1.2).

The District Court of The Hague first held the appeal admissible, although filed months after the date of the decision on objection, because the inspector could not prove when it had been sent (judgment of 23 June 2017, paras 10–11). On the merits it relied on the Supreme Court’s judgment of 19 June 2015 (ECLI:NL:HR:2015:1670), as quoted in its own judgment and in the later decisions. That case concerned the salary norm for specific expertise introduced on 1 January 2012; the Supreme Court had held that specific expertise is assessed on the facts at the time the contract is concluded, when the Dutch employer competes with foreign employers and benefits from the facility, and under the rules then in force, even if the request is made later and the rules have since changed. The District Court applied that to the whole definition of an incoming employee: the contract dated from 2011, the distance requirement did not apply, and the inspector had to decide the objection again. It awarded €1,238 in costs and the court fee of €46 (paras 15–18).

The Court of Appeal of The Hague reversed. It did not accept that the 150 km criterion is part of the expertise requirement: it is a separate condition with a different background, concerned only with whether the employee may be assumed to incur costs in reasonable proportion to the 30% flat rate, and its timing must be determined on its own terms (para. 7.10). Unlike the elements considered in the earlier Supreme Court cases, the Decree itself states when the 150 km test is to be met:

Unlike the components of that definition – having been recruited from another country and the expertise test – that were at issue in the judgments referred to in 7.7 and 7.8, the legislator, in drafting the 150 kilometre criterion added to the definition of “incoming employee”, expressly laid down the time by reference to which compliance with that criterion is to be tested. According to the text of the provision in Article 10e(2), under 2°, of the Implementing Decree, it concerns the period of 24 months preceding the start of the period of employment in the Netherlands.

Immediate effect fitted the purpose of the criterion, and the Court noted that an employee can move to the Netherlands almost eight months before starting work without harming the ruling (para. 7.12). The transitional rule in Article IV covered only cases in which the evidentiary rule was already being applied on 31 December 2011, which under Article 10ec(1) starts on the first day of employment; for all other cases the legislator saw no reason to depart from immediate effect (para. 7.13). The employee failed the test, although his employer could still reimburse actual costs tax-free (para. 7.14). The Court quashed the District Court’s decision, dismissed the appeal and made no order for costs.

The Advocate General in 2018: period and reference date are different things

The employee appealed in cassation, arguing that the moment of concluding the contract determines which rules apply, and that the period in the 150 km provision is counted back from the start of employment only once that has been settled (conclusion of 5 September 2018, points 3.1–3.5). The commentators whose views on the 150 km point the Advocate General records took the same line as the Court of Appeal: the text supplies its own reference date, the start of employment (points 4.25 and 4.31–4.35).

Advocate General Niessen considered that Article 10e(2)(b)(2°) determines only the period over which the test is applied, not the date on which the conditions of the 30% ruling must be met (point 5.6). The purpose of the ruling did not change on 1 January 2012 (point 5.12). An employer benefits from the ruling when it concludes the contract, not when the employee starts (points 5.13–5.14). Immediate effect means that contracts concluded on or after 1 January 2012 are subject to the 2012 rules, including the 150 km criterion (point 5.14). He added a symmetry argument: in the 2015 case the employee could not rely on the more favourable 2012 salary norm because his contract dated from 2011, and the same must apply where the 2012 rules are stricter (point 5.15). He proposed that the appeal be upheld.

The Supreme Court’s judgment of 30 November 2018

The Supreme Court agreed. It disregarded the employee’s reply because it was filed out of time (para. 1). The rationale of the ruling – increasing net disposable pay to help businesses attract scarce specific expertise – supports assessing, on the facts at the time the contract is concluded, whether the employee meets the conditions then in force, as in its judgments of 28 April 2006 (ECLI:NL:HR:2006:AU2303) and 19 June 2015 (para. 2.4.1). There is no reason to use a different reference date for the 150 km criterion:

In particular, the text of (the 150 kilometre criterion in) Article 10e(2)(b)(2°) of the Implementing Decree gives no reason for this. It merely lays down how, from 2012, the test contained in that criterion is to be applied, namely on the basis of the employee’s place of residence in the two years before the start of his employment. It does not follow that the test must also be applied to employees who, already before 2012, at the time their employment contract was concluded, met the conditions then applicable for the 30% evidentiary rule.

The explanatory notes to the 2012 amendment and the transitional law shed no different light (para. 2.4.2). Accordingly, whether the employee meets the requirements is assessed on the facts at the time the contract was concluded, “and that also applies to the 150 kilometre criterion (which did not yet exist in 2011)” (para. 2.4.3). The inspector had wrongly refused the request (para. 2.4.4). The Supreme Court quashed the Court of Appeal’s decision and confirmed the District Court’s judgment, so the inspector had to decide the objection again without applying the 150 km criterion. The State Secretary was ordered to reimburse the court fee of €126 and to pay €1,879 in costs for the cassation proceedings, and the inspector to pay €501 for the proceedings before the Court of Appeal (para. 4).

How the judgments fit together

Sopora settles the EU law question at the level of principle. A Member State may reserve a flat-rate expatriate allowance for workers who lived more than a fixed distance from its border, even though the line is approximate, nationals of neighbouring States bear most of the exclusion, and some excluded workers cannot in fact commute. The Court of Justice did not adopt Advocate General Kokott’s “vast majority of cases” test for the excluded group. It asked instead whether the advantaged group is systematically overcompensated, and left that to the national court. The Supreme Court then treated the question as one of the general validity of the rule rather than a matter of proof between the parties, and answered it with the legislative history and the Advocate General’s calculations, not with new empirical evidence. Taxpayers who wish to reopen the point would have to show systematic clear overcompensation for the group within the ruling, not hardship for those outside it. Both the Advocate General and the Supreme Court accepted that overcompensation may occur at high salaries; the Supreme Court held that this is not systematic (para. 2.3).

The 2018 judgment is a transitional case, but its reasoning is general. The Supreme Court did not treat the 150 km criterion as a separate condition with its own reference date, as the Court of Appeal had. It brought the criterion within the line of its 2006 and 2015 judgments, under which the date of the contract determines both the facts and the rules. Two consequences follow from the text of the judgment. For a contract concluded before 1 January 2012 the criterion did not apply at all, even though work began in 2012. For later contracts the 2012 rules apply, and the residence test looks at the 24 months before the start of employment (para. 2.4.2).

One point remains less clear. Paragraph 2.4.3 says in general terms that the requirements, the 150 km criterion included, are assessed on the facts at the time the contract is concluded, while paragraph 2.4.2 confirms that from 2012 the test looks at residence in the two years before the start of employment. Where the contract is signed well before the start date, the judgment does not spell out whether residence after signing and before the start counts. The Court of Appeal’s remark that an employee can move to the Netherlands almost eight months before starting without consequences (para. 7.12) follows from the two-thirds-of-24-months arithmetic, not from the contract date, and the Supreme Court neither adopted nor rejected it.

What it means in practice

• Border residents. Employees who did not live more than 150 km from the Dutch border for more than two thirds (16 months) of the 24 months before starting work do not qualify, and Sopora closes the EU law argument against that. They can still receive proven actual extraterritorial costs tax-free under Article 31a(2)(e), subject to the exclusions in the current text.
• The measurement. The distance is measured as the crow flies from the place of residence to the Dutch land border, excluding the territorial sea and the exclusive economic zone. Distance to the place of work is irrelevant, as the government confirmed in Parliament and the courts accepted.
• Dates. Record when the contract was signed and when work began. After the 2018 judgment the date of the contract governs which rules apply. Keep the signed contract, offer correspondence and evidence of residence (registration, leases) for the full 24-month period before the start.
• Moving early. Because the test requires residence beyond 150 km for more than two thirds of the 24 months, a relocation to the Netherlands or the border region shortly before the start date does not, by itself, defeat the condition; the Court of Appeal put the margin at almost eight months.
• Earlier periods in the Netherlands. Under the current Article 10e(4), an employee who met the 150 km condition for an earlier Dutch employment that began within the previous five years does not have to meet it again; under Article 10ef, earlier employment or stay in the Netherlands reduces the duration.
• Requests. Under the current Article 10ei(2), a decision has retroactive effect to the start of employment only if the request is made within four months; a late request shortens the duration under Article 10eg. In the 2018 case the request was made seven and a half months after the start; the judgments did not deal with that point.
• Current amounts. Do not rely on the eight-year duration or the unlimited 30% of the judgments. Check the current duration, cap, percentage and salary thresholds in Article 31a(8) and Article 10eb, and the status notes on the stages in Article 10ea.
• Immigration. The 30% ruling is a wage tax facility decided by the tax inspector under Article 10ei(1). In the parliamentary debates quoted by Advocate General Niessen, a member of Parliament noted broad support for aligning the 30% ruling closely with the rules for highly skilled migrants (conclusion of 29 September 2015, point 9.30); the sponsor side is covered in our review of recognised sponsors and highly skilled migrants.

Status

Sopora is final: the Supreme Court dismissed the appeal on 4 March 2016, and no further reference was made. The 2018 case ended with the District Court’s judgment confirmed, which required the inspector to decide the objection again without the 150 km criterion; the outcome of that new decision is not in the sources we have read. The 150 km wording in Article 10e(2)(b)(2°) is unchanged in our current translation, so the reasoning of both lines still applies to it. The surrounding rules are not: the duration is now five years in Article 31a(8) and Article 10ec(1), the amount is capped by reference to the Standards for Remuneration Act, and our status note records the change from 30% to 27% from 1 January 2027. The Supreme Court’s test in Sopora was applied to an uncapped 30% ruling with an eight-year duration; the judgments say nothing about the later changes.

Provisions discussed

• Wage Tax Act 1964: Art. 31a
• Wage Tax Implementing Decree 1965: Art. 10e, Art. 10ea, Art. 10ec

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How to cite

Case law review by BCA EU, for information. Quotations from the judgments are our translations; only the original texts published by the courts are authoritative. Judgments checked on the official sources on 30 October 2026. This page is not legal or tax advice.