Welcome to the 30% ruling!

This is a significant benefit for you, so it’s worthwhile to familiarize yourself with the details. Conditions apply! We try here to make it less complicated, so please get a cup of coffee, relax, and dive in.  Some people leave this to HR or the department support staff — don’t do that.

What is the 30% ruling?

The 30% ruling is a Dutch tax facility aimed at attracting foreign employees with specific skills or expertise to the Netherlands, subject to certain conditions. We’ll get to those in a minute.

What does it mean for me?

A lot. It means you get more take-home pay. A third of your gross pay will be paid to you as tax-free expenses. You get 70% of your salary on which you are taxed. The other 30% is paid to you as reimbursement for expenses you would not have if you had stayed home (the famous “extraterritorial expenses”).

 

Think of it this way. Your salary is a box. Let’s take a third of the stuff out and set it aside in a sack. What’s in the box is taxable like in any civilized country. The amount in the box gets smaller as tax and other social fees are withheld and paid.  The part we have set aside in the sack remains unchanged. It is tax free up to 30% of your wage package.

30% ruling

If that were not helpful enough, any international school fees your employer agrees to pay for any children you have go into the sack. They are also free of tax.

 

Your generous employer could also pay for stuff like housing or health insurance costs, but those stay in the box.  They are considered income for you, and you will be liable for tax on them.

 

There is one caveat: It is only valid for eight years and as a long as you continue to meet the criteria. More on that later.

Who gets this benefit?

You have to meet certain criteria to apply and to qualify.

 

  1. You are hired from abroad or are posted to the Netherlands;
  2. You have specific expertise that is not readily available in the Dutch labor market;
  3. Your salary meets a minimum level;
  4. You have not been living just across the Dutch border and want to move here (See below for details);
  5. You are paid through a Dutch payroll, and the salary is subject to Dutch withholding tax.

(Details below.)

Sign me up! How do I apply?

Payingit files the application for you. We are the payroll company. It takes some work and usually takes time to come through.  Keep in mind it is important to get it all set up within four months of your start date. If your application is filed more than four months after you start, you won’t get the full benefit. You miss some months. (See below for details of what happens then.)

What happens going forward?

Portable!  If you change jobs and already have the 30% ruling, you can take it with you, provided you get a job within three months. If you change employers (i.e., you join another company), it’s your new employer who notifies the tax authority. (Payingit does this for our clients. Keep them informed!)

 

Eight years: The ruling is granted for a maximum of eight years. It can be less if you have worked in the Netherlands previously, or spent any time in the Netherlands.

 

Please noteThe Dutch government announced plans to shorten the 30% ruling from eight years to five years. The shortening of the term of the 30% ruling will come into effect on January 1, 2019.

 

Watch your salary level. During those eight years, you must continue to meet the salary norm. If you earn less than the 30% ruling requires, you lose it backdated to 1 January of that year. If the employment agreement ends during a calendar year, the salary norm can be prorated accordingly.

 

Really small print!  You only get it once. If you meet the salary norm again at a later stage, the 30% ruling cannot be applied to you again.

Will my employer be open to this?

Employers benefit from a substantial cost reduction so they are generally happy to work with you on this. Rather than deal with expense reports from you—heavy administration—they can apply the 30% ruling.

Under the 30% ruling, an employer can reimburse a maximum of 30% of the wage, including the allowance, free of tax.

What are these extraterritorial expenses exactly?

Things like this can qualify:

  • Cost Of Living Allowance (COLA);
  • House hunting / acquaintance trip expenses – trip to find a place to live and look around, find a school for the kids;
  • Double housing costs – if you have a residence at home to pay for;
  • Extra housing costs;
  • Travel for home leave;
  • Costs for visas, permits, host country income tax return preparation;
  • Language courses.

 

The small print of the 30% ruling

In addition to the items in Who Gets This Benefit (above) the following conditions apply on top:

 

  1. You (both the employee and your employer) must have received a ruling letter from the Dutch tax authority that the 30% ruling can be applied. The maximum duration is eight years, by the way. The maximum duration of eight years will become five in 2019.
  1. Specific expertise has to be evaluated and agreed by the Dutch tax authority. They look at:
    • The education level of the employee;
    • Relevant work experience (two and half years in a similar role is considered sufficient);
    • Is your salary level high enough to prove your expertise;
    • You must earn a specified minimum wage level. This level is determined by the tax authority every year. There is one salary level for people under 30 and another one for people over 30. Click here for the current salary norms for the 30% ruling;
    • You have to have been living at least 150 kilometers from the Dutch border for two thirds of a 24-month period prior to starting your job in the Netherlands;
    • Final condition: An employer can reimburse a maximum of 30% of the wage, including the allowance, free of tax.

What else should I watch out for?

To have the 30% ruling apply as of the start date of the Dutch employment, the request should be filed within four months after starting work activities in the Netherlands  If the request is filed after the four-month period, the 30% ruling is granted as of the month following the month in which the request for the 30% ruling was filed.

In case you missed it: Once your salary falls below the salary norm, you lose the 30% ruling.

 

Payingit International

We know that this issue is a very important consideration for your employment in the Netherlands. We are committed to our international clients so, for 30% ruling issues, if we are not 100% sure, we will get a second opinion from another expert. We either consult them or introduce you to them to find the best solution for all parties.

 

Payingit is responsible for preparing the application. Advance work is needed, and it can take time. We charge a fee for the application process, which we will discuss with you in advance. In most cases, there is no fee for any consulting hours that might be needed in applying to the tax authority for you.

 

The current salary norms for the 30% ruling are posted on our website. We update these figures whenever we receive new information from the tax authority.

 

We suggest you take a look at what effect the 30% ruling will have on your salary. You can use the Payroll Calculator on our website to do this.

 

If you have gotten this far, congratulations! This information is very valuable for you to know and will help make your stay in the Netherlands a success.