The 30% ruling in the Netherlands allows certain expat employees to benefit from tax breaks – but under what conditions, and for how long?
The 30% ruling (or, as the Belastingdienst calls it, the 30% tax facility) is a tax break available to employees who move to the Netherlands. In some cases, thanks to a loophole, it even also applies to entrepreneurs. The 30% ruling is a notorious magnet for highly skilled migrants, and does not come without any controversy.
However, this advantage is not available to every expat in the Netherlands; there is quite a long list of conditions to meet if you want to benefit. It is critical to understand how the 30% ruling works and what these conditions are in a timely fashion: in fact, even before moving to the Netherlands.
This guide explains everything you need to know about the Netherlands’ 30% ruling, with sections including:
- What is the Dutch 30% ruling?
- Who can claim the Dutch 30% ruling?
- How does the 30% ruling in the Netherlands work?
- How long can you claim the 30% tax ruling?
- What happened to the 30 % ruling in January 2021?
- Benefits of the 30% ruling in the Netherlands
- Useful resources
J.C. Suurmond & zn. Tax Consultants
Providing overall solutions for fiscal and financial issues of both expatriates and business clients, J.C. Suurmond & zn. Tax consultants are independent and put the client’s interests first.
What is the Dutch 30% ruling?
The 30% ruling is a Dutch tax exemption for employees who were hired abroad to work in the Netherlands. If your situation meets various conditions, your employer can pay 30% of your salary as a tax-free allowance. The tax-free allowance is considered a compensation for the expenses that you incur by working outside your home country.
The 30% ruling in the Netherlands is a way to entice skilled expat workers into the country. However, it has been the focus of political debate in recent years. Many Dutch parties regularly propose to cut the allowance or even scrap it entirely. Plans by the government to reduce the allowance period came into effect on 1 January 2019, although it granted a transition period until January 2021 after protests.
Who can claim the Dutch 30% ruling?
To be eligible for the 30% ruling, the employment must meet the following conditions:
- first and foremost, the employee must be transferred or recruited from abroad;
- the employee works for an employer registered with the Dutch tax office and paying Dutch payroll tax;
- employer and employee have to agree in writing that the ruling is applicable;
- the employee did not reside within 150km from the Dutch border for the last 18 out of 24 months at the time of hiring;
- the employee’s salary meets the minimum requirements (€38,347 in 2020)
- The employee needs to have expertise that is scarcely available in the Netherlands.
The 30% ruling for PhD and Master’s graduates
Less strict rules apply for PhD and Master’s graduates younger than 30 years:
- The minimum salary requirement is €29,149.
- If the PhD was completed in the Netherlands, the requirement of ‘being recruited from abroad’ is lifted, as long as the company hires the candidate within a year of completing their studies.
Scientific researchers and training medical specialists
There is no minimum salary requirement for scientific researchers who find employment with a university or with a research institution that receive subsidies from the government. Medical specialists in training also have no minimum required salary.
The 30% rule for self-employed workers
The Dutch 30% ruling is for employees only. However, if you are starting your own business in the Netherlands, you may be eligible for the 30% tax allowance.
You must set up your enterprise as a limited company (BV) and put yourself on the payroll. This will be conditional on you meeting the other ruling requirements.
How does the 30% ruling in the Netherlands work?
The most common way to apply the Dutch 30% ruling is for the employee to agree to a salary reduction of 30%. They still receive this percentage from their employer, but as a reimbursement of expenses, which is then not subject to income tax.
However, the employee must still meet the minimum salary requirements after the 30% reduction. This can include non-cash advantages such as holiday allowance, company car, and other benefits.
For example, your original salary is €40,000; reducing it by 30% brings it down to €28,000. This would take it below the minimum threshold. You would therefore only be able to accept a reimbursement that brings your salary down to the threshold (which is currently €1,653 on a €40,000 salary). You would still benefit from the 30% ruling, but not for the full amount.
But if, for example, your salary is €55,000, this could be split between a €38,500 base salary and €16,500 as a reimbursement, because your reduced salary is above the current threshold. This means that you can enjoy the full benefit of the 30% ruling.
Bear in mind that the employer has not obligation to pass on the advantage of the 30% rule to the employee. In practice, it is possible for the employer to partially or fully pocket the benefit. This usually only happens when employees are unaware of the 30% ruling benefits. Discuss this issue with any potential employers before taking up the post. In addition, it’s probably a good idea to hire the services of an accountant or tax advisor.
How long can you claim the 30% tax ruling?
Rules around how long you can claim the Dutch 30% ruling for are currently undergoing change. Prior to 2019, the claim period was eight years. However, this became five years as of 1 January 2019.
After a period of discussions, the Dutch government agreed to implement a two-year transition period lasting until 1 January 2021. This means that:
- anyone granted the ruling between 1 January 2011 and 1 January 2013 still benefited from the full eight-year allowance period;
- those granted the ruling between 1 January 2013 and 1 January 2016 were able to receive the allowance until 31 December 2020, giving them up to an additional two years following the extension;
- anyone granted the ruling after 1 January 2016 will be eligible for the benefit for 5 years.
What if I change jobs?
If you change jobs, you can reapply for the 30% ruling, provided that you still meet the conditions. You must however sign your new employment contract within three months of termination of the previous.
What happened to the 30 % ruling in January 2021?
The 30% ruling for international workers who started receiving it between January 2013 and January 2016 ended as of January 2021. There are numerous consequences. Not only did your take-home salary become lower, but you also need to start thinking about your wealth and what this means for your 2021 tax return.
Without the 30% ruling, you can no longer opt to be considered a partial non-domestic taxpayer. In other words, you will now pay taxes as a full resident, and you will need to state your worldwide assets in your Dutch tax return. It is important that you prepare thoroughly for this change, and we highly recommend that you seek tax advice.
Benefits of the 30% ruling in the Netherlands
In addition to receiving 30% of your salary tax-free, there are many other benefits to the Netherlands 30% ruling.
Partial non-resident status
Under the 30% ruling you can opt for partial non-residency status. This means that, even while residing in the Netherlands, you will be considered to be a non-resident taxpayer in Box 2 and Box 3 of the Dutch tax return form. However, you will still be a resident for Box 1 income.
Non-residents don’t have to pay income tax on Box 2 and 3 income (except on real estate located in the Netherlands and substantial shareholding in a Dutch resident BV). You will also be entitled to the partnership ruling in Box 1.
If you have a foreign driving license, in most cases you have to take your test again in order to obtain a Dutch driving license. However, if you benefit from the 30% ruling, it is possible to exchange your foreign driving license for a Dutch license without retaking the test.
This also applies to all family members registered at the same address as the holder of the 30% ruling.
The Dutch 30% ruling will become effective in retrospect if the application is submitted within four months after the first day of employment. If the application is submitted after four months, it will become effective as of the first day of the month following the month of application. However, all conditions still apply, including that the employer must have recruited the employee from abroad.
Applying for the Dutch 30% ruling
The application for the ruling in the Netherlands needs to be made jointly by both employer and employee. You can do this by completing the application form or calling the tax information line for an information pack.
You will need to provide the Dutch tax office with copies of:
- passport or valid photo ID
- a Dutch employment contract or a letter from your employer confirming that they offered you the position
- your BSN number, if you have it
- Dutch residence and Dutch work permits (if applicable)
- details of your Dutch address
- proof of residence in another country before the hiring process began
- company details including company tax number
- written agreement clearly stating that both parties have consented to the application for the ruling
Lowering your taxable income will most likely have implications for your potential pension, as well as unemployment or disability benefits, since these benefits are based on your taxable salary. This is one of the reasons why both employer and employee must complete the application for the 30% ruling, and that an agreement in writing is necessary. More importantly, it is also why consulting a tax advisor is probably wise.
- Belastindienst – information on a range of Dutch income tax issues
- Government of the Netherlands – website with information on income tax in the Netherlands