If you’re an expat thinking of starting your own business in the Netherlands, you might be able to claim the 30% ruling and get a tax exemption on part of your earnings.
Expats living in the Netherlands can benefit from what’s known as the 30% ruling if they’re working for a Dutch employer, but what isn’t so commonly known is that this ruling can also apply under certain conditions to those who are self-employed. Saskia Hemmes-van der Kruk, one of the expert tax advisors at SAS For Expats, explains how.
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What is the 30% ruling for expats?
The 30% tax ruling in the Netherlands is a tax ruling for workers who are hired from abroad, providing they meet certain conditions such as minimum salary requirements. If eligible, expat employees can receive 30% of their salary as a tax-free allowance processed in payroll and usually paid out on a monthly basis. This allowance is treated as compensation for the costs of working/living in the Netherlands, and it can be paid for up to 5 years.
Although the 30% rule applies to employees rather than freelancers, expat entrepreneurs who want to start their own business in the Netherlands can also benefit from the ruling if they follow the right procedures.
Self-employment and the 30% ruling
Starting your own business is a popular move in the Netherlands, with 16.8% of the working population self-employed. This includes many expat entrepreneurs who have relocated and are working freelance or running their own company. But not all expats entering self-employment are aware that, when they are sorting out their Dutch tax arrangements, they can qualify for the 30% tax ruling.
In order to be eligible for the 30% rule, you need to set up your enterprise as a limited company (BV) in the Netherlands and become an employee of it. This means that legally you will be classified as employed rather than self-employed.
As Saskia explains: “The 30% ruling is for employees, so if you’re self-employed as a sole trader or in an unincorporated business, you cannot claim it. However, if you set your business up as a separate legal entity such as a BV, you can go on the payroll as an employee of your own Dutch company. As long as the company is registered with the Dutch tax office for payroll tax, you’ll be eligible for the 30% rule if you meet the other conditions.”
Moving to the Netherlands to start a business
One of the conditions of the 30% tax ruling in the Netherlands is that you must be recruited from abroad. This means that you can’t just relocate and then set up a business if you want to claim the ruling. You can, however, set up the BV before moving to the Netherlands. Once the company is registered with the Dutch authorities, you can enter into an employment relationship with it and relocate as an employee. This enables self-employed contractors coming from abroad to start a business in the Netherlands and still benefit from the 30% rule.
As setting up a legal company in a foreign country before you move there can be a complex process, it’s wise to seek professional advice and assistance with this.
Keeping the 30% ruling if you go from employment to starting a business
As mentioned, the 30% rule can be applied for a maximum of five years and it can continue even if you change jobs in the Netherlands. As long as you still meet the eligibility criteria and you sign your new employment contract within three months of leaving your job, you can reapply for the ruling.
If you’re an expat benefiting from the 30% tax ruling in the Netherlands, this means that you can leave your job to start your own business and still keep the ruling.
“As long as the business is set up as a BV, the same rules apply. So if your BV is set up and you sign your employment contract with it within three months of leaving your job, you’ll have no problem transferring your 30% ruling to your new business” says Saskia. “However, be aware that the end date of the ruling will remain the same, even though you might not have used it for those three months..”
The only situation where it’s not possible to claim the 30% rule when you’re self-employed is if you start a side business or take on additional freelance work while still in employment.
“The 30% ruling is only applicable for one employment relationship. So if you start a second job or do extra self-employed work on top of an existing job, you won’t meet the eligibility criteria where this work is concerned so will only be able to claim for the ruling on your existing employment,” says Saskia.
Other things to consider
Before deciding to pursue the 30% rule option when starting a business, you should consider both the pros and cons and make an informed decision. There are for example huge advantages to the partial non-residency status, since your income out of savings and investments (box 3) will not be subject to taxation. But while there are financial benefits, you’ll need to understand the tax obligations and administrative responsibilities (such as setting up payroll) of running a BV. A good tax adviser or accounting service such as SAS For Expats will be able to guide you through everything you need to know about the 30% ruling and other expat-related financial queries.
Saskia Hemmes-van der Kruk
Saskia Hemmes-van der Kruk, founder of SAS for Expats, has over 20 years of experience as a consultant with one of the “Big Four”, where she was responsible for managing expat tax and social security issues with multinationals. 10 years ago, she decided that it would be more fulfilling to serve companies and individuals choosing tailor-made solutions, so she founded SAS for Expats, where a dedicated team of six consultants serve their clients with great enthusiasm and a personal approach.Get a quote