Setting up a BV

Seven sins of the 30 percent ruling: common pitfalls and attention points

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Much information can be found online about the favourable 30 percent ruling for inbound employees, but there is there is often much more to say than what is written. We’ve seen that a lack of in-depth knowledge about the details or an incorrect interpretation often results in missed opportunities or irreversible mistakes. [Contributed by TTT-Group]

That’s why, in this post, we point out some of the most common misunderstandings or situations where upfront, proper advice could have made all the difference. We do so with simplified examples in which we have removed as much unnecessary detail and complexity as possible, since navigating the Dutch 30 ruling can already be quite complex. It is also not entirely necessary to offer such detail to clarify the tax ruling in the Netherlands — we simply do not want you to make the same mistakes that many have already made.

1. The salary norm is a taxable salary norm. No need to earn EUR 52,699 to get the ruling!

The most common misunderstanding is that someone must earn at least EUR 52,699 (2016) or EUR 40,059 (when younger than 30 and in possession of MSc degree) to meet the salary conditions of the 30 percent ruling. Some websites are quite misleading and/or lack important details, often failing to display an essential understanding of this critical condition. The salary norm is a taxable salary norm, which means it is the gross taxable salary after the 30 percent ruling reduction. Taxable salary includes positive salary such as monthly salary, holiday allowance, paid bonus, stock option income and company car benefits, as well as employee pension premiums (which decrease the taxable salary norm as it is deductible). Furthermore, under the Dutch 30 tax ruling, it is permissible to grant a reimbursement lower than 30 percent of the gross salary. The applicable salary norm to meet is EUR 36,889 (normal), EUR 28,041 (lower norm) or nil (exceptional, and only for certain types of researchers). An example is always easiest to explain this simple, though important, concept:


If an employee older than 29 earns a total gross salary of EUR 40,000, he meets the salary norm. However, the employer must ensure that the maximum tax-free reimbursement is considered by granting a tax-free allowance no higher than EUR 3,111 — being EUR 40,000 minus EUR 36,889 (minimum norm threshold to meet). This means that the tax-free allowance is, in this case, a tax-free allowance of almost 8 percent. The breakeven point where an employer can provide a maximum tax-free allowance of 30 percent is EUR 52,669, since this is the outcome of EUR 36,889 x 100/70 percent.

This specific misunderstanding of the salary norm concept is one of the main reasons individuals eventually learn that they could have obtained the 30 percent ruling in the past, often several years prior. A similar misconception is that one has to earn at least EUR 36,889 in salary, but there is insufficient awareness that this is a minimum amount of taxable salary. In other words, the employer pays a tax-free reimbursement of 30 percent while the employee earns less than EUR 52,669. As a result, the Dutch tax authorities can inquire, for example, two years afterwards about a reported salary level that was too low, requiring that the company make necessary retroactive payroll corrections, which often results in the company paying, at least in part, the extra tax burden of the involved employee(s).

Therefore, a group of employees with an annual salary (before the 30 percent ruling reduction) higher than EUR 36,889 but lower than EUR 52,699 must be considered with caution. The same applies for employees to whom the lower salary norm applies if their salary is between EUR 28,041 and EUR 40,059. This is one of the reasons that some employers choose not to apply for the 30 percent ruling for employees whose salary is within these two ranges.

30 percent ruling

2. No 30 percent ruling with previous employer? Try again with your new employer

There are various reasons why someone may not have obtained the 30 percent ruling at the first application. We often see that someone did not receive the ruling because the wrong conclusions were drawn or the application was erroneously filed. Other times, employers simply did not want to deal with the complexity of the ruling. When these employees change employers, the question of whether they, in fact, could be eligible for the 30 percent ruling with the new employer often arises.

If the conditions at the first application were actually met, the individual may still obtain the 30 percent ruling with the new employer. Of course, there are various conditions: the new employment must have been initiated within three months after the termination date of the previous employment, and the salary norm during the previous employment must have been continuously met. And, of course, there should still be sufficient time left, given the so-called reduction rules that can decrease the 30 percent ruling duration period.

We have summarised some situations we have occasionally come across. It is important to understand that the Dutch tax authorities (DTA) adopt certain (unpublished) generous policies.

Scenario 1

Your previous employer did not want to apply for the 30 percent ruling, because, for example, they did not want to treat you more beneficially than their (regular) Dutch employees. However, your earnings were over the salary norm. In addition, you also met the other criteria (recruitment from abroad and the 150-km condition). If you enter into employment with another employer within three months after the termination date of the previous employment, and you meet the salary norm with the new employer, the DTA will grant you the 30 percent ruling with the new employer.

Scenario 2

The same as the first scenario, but the first employer did not apply for the 30 percent ruling because the salary norm was misinterpreted (see point one). You can still receive the ruling, assuming you found new employment within three months and meet the salary norm with your new employer.

Scenario 3

You have a foreign employer who did not operate a Dutch salary administration. The 30 percent ruling was not applied, as it requires, as a formal condition, a wage tax-withholding agent running a Dutch payroll administration. You can still get it, assuming you found new employment within three months and meet the salary norm and other criteria (e.g. recruitment from abroad and the 150-km condition).

Scenario 4

The same as the above, but you have had other subsequent employers who did not apply the 30 percent ruling for one or more of the above reasons. You can still receive the ruling with the new employer on the same basis as indicated above.

Obviously, it will not be a standard application since you have to demonstrate that the 30 percent ruling conditions were continuously met with the previous employer(s). This means that you must have all the required paperwork, such a payslips, annual statements and employment contracts. You may have to contact your previous employer if you have lost or never had these documents.

3. Don’t let sabbatical or part-time take away the 30 percent ruling

The salary norm is a continuous test, meaning that a non-earning period (while being employed) or a reduction of salary can cost you the 30 percent ruling entitlement. The same applies when someone does not find new employment within three months after the termination of the previous employment. Below are the most common scenarios in which one can lose the 30 percent ruling.

Scenario 1: Sabbatical after termination of employment

An employee residing in the Netherlands takes a sabbatical after the termination of his employment. He returns to work after six months and finds a new job. Unfortunately, he cannot be considered to be recruited from abroad as he was still Dutch tax resident and, thus, he is now considered to be locally recruited. Since he did not secure new employment within three months after termination of his old employment, he loses the 30 percent ruling. He can no longer obtain it unless he can be considered newly recruited, but this typically requires that he move his fiscal residency elsewhere before re-entering the Dutch labour market. If he had secured a new job within three months but started with his new employment four months later, for example, this would not have been a problem.

Scenario 2: Sabbatical during continuous employment

An employee over 29 years old and residing in the Netherlands takes a sabbatical while his current employment continues, but he does not get paid during this sabbatical period. He returns to work after six months. The applicable salary in the six-month working period is EUR 30,000 and thus below the salary norm. Unfortunately, he did not continuously meet the salary norm that is reviewed by means of an annual approach (with the exception of transitional circumstances, such as change of employer). He can no longer obtain it unless he can be considered newly recruited at some point in time.

Please note that in regards to the second example, the salary norm is not influenced by periods of reduced or lost salary because of pregnancy or parental leave. It is only for these two types of leave that the reduced salary is ignored in the assessment of whether the salary norm is met on an annual basis.

For other leaves, there is no relaxation; it can eliminate your 30 percent ruling eligibility, usually starting from 1 January of the year in which the salary norm is no longer met.

3. Working part-time

An employee over 29 years old residing in the Netherlands has a taxable salary of EUR 50,000. She can benefit from the 30 percent ruling but not fully, as the maximum tax-free allowance is lower than 30 percent. She decides to begin a new study and starts working part-time (60 percent) for the next two years. She starts doing so as of 1 July 2016. In 2016, she still meets the salary norm since the taxable salary norm is EUR 40,000 (6/12 months x EUR 50,000 [EUR 25,000] plus 6/12 x EUR 30,000 [EUR 15,000]). As of 2017 she loses the 30 percent ruling, as her taxable salary is EUR 30,000 — simply not enough to keep the 30 percent ruling, as the salary norm is a fixed norm with no recognition of part-time adjustment.

The examples are clear: be cautious when you have the 30 percent ruling. You do not want to lose the 30 percent ruling because of an honest mistake. Planning and timing can make all the difference to an all or nothing outcome.

Dutch 30 ruling

4. If you become 30 years of age

If an employee to whom the lower salary norm applies becomes 30 years old, he must meet the normal salary condition from the first day of the following month. The Dutch tax authorities hold that the prorated salary norm applies for the first period of the calendar year, and the prorated salary norm applies for the second period of the year. Depending on the salary level, this may result in losing the 30 percent ruling going forward, due to the continuity condition of the salary norm.

You can imagine that age is often overlooked by employers as a factor in the 30 percent ruling. As a result, the ruling can become invalid as of the date that the salary norm applies. Alternatively, if the employee’s gross taxable salary — before reduction due to 30 percent ruling — is between EUR 36,889 and EUR 52,699, the employer has granted a tax-free allowance that was too generous and therefore must still be partially paid as taxable reimbursement so that the new higher salary norm is met.

5. Want to work as self-employed? Opt for a BV over sole proprietorship, but plan ahead

The 30 percent ruling is only available for employees, so if you want to start working as self-employed in the Netherlands, do not choose sole proprietorship; instead, you may be eligible for the 30 percent ruling if you set up a BV, or (foreign) limited company. You will then be under employment with the BV, which acts as your formal employer. Of course, tax administration costs will be higher, but the benefit of the 30 percent ruling can certainly be worth it.

However, it must be done wisely if you plan to come to the Netherlands to work and live, as you need to demonstrate that you have been recruited from abroad by a Dutch wage tax-withholding agent. In these situations, this means that prior to moving to the Netherlands, an employment is offered by the BV or at least a BV incorporation. The latter means that the establishment of a BV must be initiated, and this BV (incorporation) has offered you employment before entering the Netherlands.

Quite often we are contacted by clients a few weeks or even days before they move to the Netherlands without any knowledge of this. Since they are still (just) in time, however, we can take action immediately by assisting with draft employment contracts, making arrangements with the notary and so forth. Once the BV has been incorporated, the BV must confirm that it has agreed to employment. The application of the 30 percent ruling can then be filed. If someone has already moved to the Netherlands and started as a sole proprietor and subsequently wishes to switch to a BV, it is unfortunately too late. Make sure to plan ahead as to not miss out on a great opportunity.

Setting up a BV can also be a wise and flexible option if someone has lost his or her job with an employer with whom he had the 30 percent ruling benefit and may not be able to secure employment within three months. If someone enters into employment within three months with the BV, it can thus be arranged that the employee keeps the 30 percent ruling based on the BV’s employment. It is sometimes easier to be self-employed than via direct employment, especially in the past few years. Keep the option of setting up a BV in mind to stay flexible, and perhaps not lose what you have.

Once you have a BV, you may consider paying out as much as salary as possible as long as you have the 30 percent ruling, as this is generally the most beneficial in regard to taxes. The maximum tax rate is 36.4 percent (52 percent tax on a 70 percent taxable basis) whereas the BV’s profits (turnover minus salary and other costs) is taxable in the range of 40–43.75 percent (20–25 percent corporate income tax on company profits and 25 percent income tax on the remainder, which is ultimately paid out as dividends or liquidation income). The difference is already a few percentage points.

Additionally, since you can elect partial non-resident status (in which you do not have to pay tax on the value of your bank and savings accounts) under the 30 percent ruling, you do not have to account for an additional tax impact on the excess money you have in the bank.

6. Income from past employment/post-termination income

The 30 percent ruling is not applicable on income from past employment. Severance pay is considered income from past employment and the 30 percent ruling therefore does not apply.

The 30 percent ruling is, however, applicable on income from current employment. In principle, this also applies on post-termination income, such as bonuses or a pay-out of outstanding vacation days and holiday allowance, provided this is taxable/paid within one month (or four weeks, depending on the applicable wage tax time period) following the month of termination. If it is paid/taxable later, the 30 percent ruling is not applicable.

Stock options/SARs or vested stock require specific attention. In principle, accelerated vesting is permitted in the 30 percent ruling, provided that it is within the one month period as this qualifies as income from current employment. If the employee loses his entitlements to (unvested) equity and receives cash compensation for the loss of equity, such compensation is considered severance pay/income from past employment, in which case the 30 percent ruling is not applicable.

Employers should take care in applying the 30 percent ruling on payments made after employment termination. Timing and nature of the payments are deciding factors in claiming the 30 percent ruling.

Dutch 30 tax ruling

7. Tricky gardening leave!

The Dutch tax authorities assert that gardening leave payments qualify as income from past employment, since the active employment has ceased. Case law is dynamic in this area, and it is still unclear whether the DTA’s view is correct and whether certain conditions must be met before gardening leave is considered income from past employment.

Due to the DTA’s position, the combination of the 30 percent ruling and gardening leave is quite tricky. There are three main risks involved:

  1. The 30 percent ruling may not be applicable on salary received during inactive months;
  2. The employment can be considered already terminated, in which case the 30 percent ruling also ends. The 30 percent ruling can then only be applied on post-termination income that is paid/taxable within the aforementioned one-month period. It can therefore greatly jeopardise the application of the 30 percent ruling on income that is considered to be from current employment, but paid/taxable later than one month following the month in which the active employment activities are terminated.
  3. If the employment is considered already terminated, there is another risk with the continuation of the 30 percent ruling with another Dutch employer where there is more than three months’ time between the start of gardening leave and commencement of an agreement with a new employer.

Employees with the 30 percent ruling should avoid agreeing to gardening leave. If this is not possible, try to limit the period and seek possibilities to already (partly) pay post-termination income within one month following the end of active employment, and allow immediate exercise of options. If this cannot be done, it is advisable that employers no longer apply the 30 percent ruling after the one-month period.

This post only focuses on certain aspects of the complex 30 percent ruling that is generally not available elsewhere. Please visit our website at for more information about the conditions and content of the 30 percent ruling. You can also contact the author at

Contributed by TTT-Group


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