Are you eligible for the Dutch 30% ruling? This guide explains how expats can claim a tax exemption under the 30% ruling in the Netherlands.
Maybe you’ve heard of the 30% ruling available to employees who move to the Netherlands and want to benefit. But what is the 30% ruling in the Netherlands and how does it work?
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 Dutch 30% ruling for?
- What happens to the 30 % ruling in January 2021?
- Benefits of the 30% ruling in the Netherlands
- How to apply for the Netherlands 30% ruling
- Useful resources
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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 various conditions are met, the employer can to pay you 30% of your salary as a tax-free allowance. The tax-free allowance is considered a compensation for the expenses that the employee incurs by working outside his or her home country.
The 30% ruling in the Netherlands is seen as a way of enticing skilled expat workers to the country. However, it has been the focus of political debate in recent years. Many Dutch parties proposing to cut the allowance or scrap it entirely. Plans by the government to reduce the allowance period came into effect on 1 January 2019, although a transition period until January 2021 was granted after protests.
Who can claim the Dutch 30% ruling?
To be eligible for the 30% ruling the following conditions have to be met:
- the employee works for an employer that is registered with the Dutch tax office and pays Dutch payroll tax;
- employer and employee have to agree in writing that the ruling is applicable;
- the employee has to be transferred from abroad or has to be recruited abroad;
- 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’ does not have to be met if the candidate is hired within a year of completing his or her studies.
Scientific researchers and training medical specialists
There is no minimum required salary for scientific researchers who are employed by a university or a research institution that is subsidized by 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 if you set your enterprise up 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 for the Dutch 30% ruling to be applied is for the employee to agree to a salary reduction of 30% in exchange for this percentage being reimbursed in expenses.
However, you must still meet the minimum salary requirements after the 30% reduction. This can include non-cash benefits such as holiday allowance, company car, and other benefits.
For example, your original salary is €40,000 and reducing it by 30% takes it down to €28,000. This would take you below the minimum threshold, so you you would only be able to receive a reimbursement that would take 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 to the full amount.
But if, for example, your salary is €55,000, this could be split between €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 is not obliged to pass on the advantage of the 30% rule to the employee. In practice, it is possible for the employer to partially or fully take the benefit. This usually only happens when employees are unaware of the 30% ruling benefits. Therefore it is a good idea to discuss this issue with any potential employers before taking up the post.
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 8 years. However, this was shortened to 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 will still benefit for the full 8-year allowance period;
- those granted the ruling between 1 January 2013 and 1 January 2016 will be 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
Those who are changing jobs within their allowance period will still be able to receive the 30% ruling, as long as they are still within the originally granted period.
What happens to the 30 % ruling in January 2021?
The 30% ruling for international workers who started receiving it between January 2013 and January 2016 is ending as of January 2021. If you are one of them, it is important to be well prepared for the consequences. Not only will your take-home salary become lower, but you will also need to start thinking about your wealth and what this will mean for your tax return.
Without the 30% ruling, you can no longer opt to be considered a partial non-domestic taxpayer. In other words, you will be treated as a full resident tax payer, and you will need to state your worldwide assets in your Dutch tax return. It is important that you are well prepared for this change, and we highly recommend that you seek tax advice.
Benefits of the 30% ruling in the Netherlands
In addition to getting 30% of your salary paid tax-free, there are 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 on the Dutch tax return form. However, you will still be considered 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 redo your test 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.
If you change jobs, you can reapply for the ruling, provided that you still meet the conditions and your new employment contract is signed within three months after termination of the previous.
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
- Dutch employment contract or letter from your employer confirming that you have been offered 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 being hired
- company details including company tax number
- written agreement clearly stating that both parties have consented to the application for the ruling
Lowering the taxable income will most likely have implications for your potential unemployment or disability benefits, since these benefits are based on your taxable salary. This is one of the reasons why the application for the Netherlands 30% ruling has to be done by both employer and employee and an agreement in writing is necessary.