Meeting new people and the 30% ruling
When I meet new people in a social setting and the subject of work comes up—“So. What do you do for a living?”—I answer, “I am an employment contract and tax specialist, and I help companies and knowledge migrants get set up in the Netherlands.” You would not believe how often people’s eyes glaze over and they look like they are going to go to sleep on their feet. I am used to it. But if I can work in the words “the 30% ruling,” all of a sudden they snap to attention. Most foreigners here have heard of it and know it’s a “good thing,” but they can’t describe it in any detail. From that point on, we have something to talk about!
The 30% ruling is a Dutch tax facility aimed at attracting employees with specific skills or expertise to the Netherlands, subject to certain conditions. It is a complex topic, but we make it as easy as possible for our clients. (Honestly, we like this stuff.)
For employees who qualify, it means you get more take-home pay. You are taxed on only 70% of your salary; the other 30% is paid to you as reimbursement for expenses you would not have if you had stayed home (the famous “extraterritorial expenses”).
Why does the Dutch government provide the 30% ruling facility?
The government of the Netherlands put this in place to attract highly skilled employees – from around the world to work here. The 30% ruling is an important step in meeting that objective. And it’s not just employees who benefit—companies/employers get advantages too. After all, companies have a real need for educated and experienced specialists, and there is global competition for certain skills and expertise. The 30% ruling is not applicable to self-employed individuals, but when a contractor is working via our payroll umbrella services, the contractor is considered employee and thus may obtain the 30% ruling.
When you move from your home country for a job in the Netherlands, some things cost more and you will have additional expenses like:
- Cost of Living differences;
- House hunting / acquaintance trip expenses;
- Double housing costs – maintaining a home in your country;
- Extra housing costs;
- Travel expenses for trips home;
- Cost of visas, permits, host country income tax return preparation;
- Dutch language lessons.
These type of extra-territorial costs cannot be paid tax free in addition to the 30% allowance as the 30% ruling is meant to cover for these expenses. International school fees can still be reimbursed besides the 30% allowance you will receive.
When you might need special assistance
- Should your salary level fall below the required norm for the 30% ruling (see below);
- You start working part-time;
- You are younger than 30 and have a Masters degree and become 30 years;
- Your employment agreement is terminated or you change companies.
The 30% ruling is no straightforward procedure, there are conditions and there is fine print. If your application is not submitted or processed correctly, there is a risk you will not be granted the benefit. If your job situation changes and you don’t do what’s required, there is a risk you will have trouble. (We have a full explanation of the ins and outs on the Payingit International website. Check it out here. We invite you to contact us for more specific explanations and advice too.)
The application is submitted at the time you sign an employment agreement. You can do it yourself online with the tax authority (the belastingdienst). Or Payingit International files the application for you in the situation where we will be acting as your employer (when we are the payroll company).
It takes some work and usually takes time to come through. Information about your former employment, where you have been living up until the application date, when you came to the Netherlands, your age, and your salary will be needed to fill out the form.
The tax authority will notify your employer, normally within six weeks, whether the 30% ruling has been granted.
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.
The fine print
The 30% ruling is for specific employment cases and particular skills, and there are conditions that must be met.
- The employer and the employee both have to agree to use this facility;
- The employee must be recruited from abroad by a Dutch or foreign employer who is registered as Dutch payroll agent;
- The person must have special expertise. This is determined to be the case based on a certain salary level (a high salary level is an indication of expertise);
- The 150 km condition: the applicant has to have lived more than 150 kilometers from the Dutch border for at least sixteen of the twenty-four months before the employment agreement starts.
Important to be aware of going forward:
- You can take it with you. 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 International does this for our clients. Keep them informed!);
- Time limit: 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;
- The salary norm: 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!
It you do not get the 30% ruling per the primary employment due to a too low salary, you will not be able to repair that. If you are granted the 30% ruling you can however loose it, so it’s important to make sure your salary level does not fall below the norm. Even if you meet the salary norm again later, the 30% ruling cannot be applied to you again. So, if not obtained from the start or once lost, never obtained. Unless you leave the Netherlands and return at some point whilst meeting all conditions.
There are two salary levels; they are based on your age. They are adjusted every year by the tax authority. In the below example we explain how the salary needs to be determined.
In this example, someone with a gross salary of EUR 4.500,00 plus a monthly payment of their holiday allowance and a pension withholding.
With the 30% ruling the fiscal salary would become EUR 3.348,18 (70% * EUR 4.783,11)
In that case the fiscal salary for a year would become EUR 40.178,16 which is above the determined threshold of EUR 37.000,00 on a yearly base for someone above the 30 years of age.
In case you are under the 30 years of age the determined threshold is EUR 28.125,00. To earn the required salary for the 30% ruling we have calculated the minimum gross salaries you need to earn (with and without the 8% holiday allowance). The actual salary requirements can be found on our website.
If your salary is exactly the salary that is the minimum required, we advise you to discuss this thoroughly with your payroll administrator to make sure it will be processed correctly. You don’t want to fall below the level inadvertently.
If an expat earns salary income in other countries in addition to the Netherlands, the base salary for the 30% ruling will be the total (worldwide) employment income.
The 30% ruling makes a real difference for an employee and their employer. Because of the sensitive nature of payroll and tax issues and the many details of this tax facility, we always recommend checking eligibility with a specialist. Any doubt is the best reason to contact us. Contact us without any hesitation! We would be glad to help. You can reach me directly at +31 20 225 2520.