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Everything you need to know about the 30 % ruling in The Netherlands

Categories: Finance,Sponsored

Most Expats are aware of the 30%-ruling – a beneficial ruling designed to lower the Dutch tax burden; however, few seem to understand the exact criteria, benefits and overall implications. Vincent Wijgerden from ExpatTaxes (GVN) explains the 30% ruling below.

The 30% ruling applies to employees, coming from abroad, who possess expertise which is scarce on the Dutch labour market. In general, any Expat working in The Netherlands qualifies, provided that they satisfy certain conditions (outlined below). The 30% ruling is applied to present income only (salary, bonus, etc), and ensures that up-to 30% of the gross income received is not taxed, treating it like a tax-free allowance. With the Netherlands having a top tax bracket of 49,5%, application of the 30% ruling provides a major tax advantage!

Advantages of the 30% ruling are:

  • 1) your tax rate is equivalent to a maximum rate of approximately 34,56%;
  • 2) you are not taxed on your worldwide savings and investments with the exception of Dutch property;
  • 3) the 30% ruling will be provided for a maximum duration of five years.

What qualifies you for the 30% ruling:

  • 1) you must be an employee and work for an employer withholding Dutch payroll tax;
  • 2) you must have specific expertise (explained below) which is scarce in The Netherlands;
  • 3) you must have been recruited from abroad or have been transferred from abroad to The Netherlands;
  • 4) you must not have resided within 150 km of the Dutch border for more than 16 months out of the last 24 months prior to the start of your employment in the Netherlands.
  • 5) you must submit an application for the 30% ruling within 3 months of starting your job in The Netherlands in order for the 30% ruling to have a retroactive effect.

What is considered scarce expertise:

Scarce and specific expertise is deemed to exist when the minimum salary level for the 30% ruling is met.

As of 2021, employees must have a minimum annual taxable salary of €38.961 excluding the 30% ruling benefit. For those holding a Master’s degree, who are younger than 30 years old, the minimum annual taxable salary must be no less than €29,616 excluding the 30% ruling benefit . Scientific researchers and employees working at registered institutions, PhD graduates or doctors-in-training are not required to have a minimum salary to apply for the 30% ruling.

So, there you have it! The basics of the 30% ruling.

We realize you may still have some questions, which is why we’ve also compiled a set of FAQ’s – based on questions most often asked by our clients and things we’ve noticed frequently need some extra explanations:

What does “recruited from abroad” mean?

An employee is considered to have been “recruited from abroad” if s/he was living outside of The Netherlands at the time of accepting the job offer. If the employee is living in The Netherlands when s/he accepts an offer, then the employee is not eligible for the 30% ruling. Exceptions, however, do apply for foreign PhD students in The Netherlands.

I forgot to apply for the 30% ruling in my previous job, now what?

It is possible to receive the 30% ruling when switching jobs even if you did not apply for it in your previous one. In order to apply, you must:

  • Have satisfied the conditions for the 30% ruling when starting your first job in The Netherlands (i.e. you were recruited from abroad and met the minimum salary criterion); and,
  • Satisfy the conditions in your current job (i.e. meet the minimum salary criterion).

What happens when I switch jobs?

If you have been granted the 30%-ruling, and intend to switch to another employer in The Netherlands, you must sign the new employment contract within 3 months of ending the previous one. According to the government, employees who possess expertise which is scarce on the Dutch labour market should have no difficulty finding a new job.

Can I apply for the 30% ruling when I set up a business?

As the 30% ruling is only applicable in an employment relationship, you cannot apply for the 30% ruling when setting up a business in The Netherlands unless it is a Dutch BV (limited liability company) or a foreign equivalent.

A limited liability company with a shareholder who owns at least 5% or more of the shares is mandated to pay its shareholder a salary provided the shareholder works for the BV. As the BV (or equivalent) needs to pay a mandatory salary, the 30% ruling may be applicable on the salary provided the applicable minimum salary is met.  Should you decide to start your own business, the BV must be setup within 3 months after your previous job’s contract ended to be eligible for the 30% ruling. It is possible to apply for the 30% ruling and be recruited from abroad by your own BV. In this case, the BV must be setup, and the employment contract signed, before becoming a tax resident of The Netherlands.

Applying for the 30% ruling when setting up a business requires careful planning; therefore, it is highly advised to speak with a member of ExpatTaxes to make sure everything is setup appropriately before beginning this process.

On what income is the 30% ruling applicable?

The 30% ruling is applicable on income from employment, only. This includes: regular salary, bonus income, income from stock options and any other monetary employee benefits. Please note that the 30% ruling is not applicable on severance payments. Exceptions may apply depending on how the severance payment is structured. Please consult ExpatTaxes for more detail.

What about foreign income? Does the 30% ruling apply?

Expats residing and working in The Netherlands often receive foreign income. Under certain conditions, the 30% ruling may be applied on foreign income, provided the income is taxable in The Netherlands and paid through a salary administration as the 30% ruling (which involves lowering of the taxable salary) may not be applied at the time of filing the income tax return. The applicable tax treaty in combination with local tax law will determine if the income is taxable in The Netherlands.

What is “deemed non-resident tax payer status” for income tax purposes?

Expats who have been granted the 30% ruling may opt to choose the “deemed non-resident tax payer” status in their income tax return. The advantage of choosing this status is that you are taxed as a “non-resident tax payer” for savings and investments. This means that local and foreign bank accounts, and portfolio investments, are not taxable; nor are the shares in foreign companies. Under this status, you are only taxed on Dutch property.

As no taxation occurs on savings and investments, in this case, it is not possible to credit any foreign taxes withheld on foreign dividend, interest, rental or other income.

Partners of expats may benefit from the “deemed non-resident tax payer” status provided both the expat and his/her partner qualify as fiscal partners. Expats who are married, are registered as fiscal partners, have a child or jointly own Dutch property, may qualify as fiscal partners.

How long does the 30% ruling last?

As of 1 January 2019, the 30% ruling is granted for 5 years. For 8 year 30% rulings decisions granted before 2019 and which expire in 2021, 2022 or 2023 you will lose the remaining time and the ruling has ended on 1 January 2021. 30% ruling decisions granted before 2019 and which expire in 2021, 2022 or 2023 will remain valid until 31 December 2020. For 10 year 30% ruling decisions granted before 2012 you will lose the remaining time and the ruling has ended on 1 January 2021.

If you have any questions regarding the 30% ruling or tax issues, please contact ExpatTaxes by visiting their website or by sending an email to info@expattaxes.nl

5 Responses to "Everything you need to know about the 30 % ruling in The Netherlands"

  1. Magdalena Ivanova
    Magdalena Ivanova Posted on 03/18/2019 at 11:32

    Hi, I think you have a mistake with the minimum gross salary for the 30% ruling. It is for sure not €53.918 gross.

    • expatrepublic
      expatrepublic Posted on 03/18/2019 at 14:39

      Hey Magdalena! Thanks for bringing it to our attention, we will go back to the author and discuss it with him to see if in fact there is an issue.

    • expatrepublic
      expatrepublic Posted on 03/19/2019 at 23:28

      Hey Magdalena, we checked with our tax expert partner and he provided the following response to your inquiry:

      “It is confusing but the minimum gross salary mentioned in the article is correct.

      The minimum gross salary in the article relates to the salary without application of the 30% ruling. In order to be granted the 30% ruling an individual must meet the gross salary criteria of
      € 37.743,- which is the salary condition if you have been granted the 30% ruling. (in legal terms it is the salary norm without the 30% tax free allowance included). So if the gross minimum salary mentioned is the salary if the 30% ruling has been granted, the gross salary calculated in order to check if an individual meets the salary condition is € 37.743/0,70 = € 53.918. This is the gross salary without application of the 30% ruling. It is far easier for expats to understand the amount of € 53,918 as this is the minimum salary which needs to be in their employment contact (a lower gross salary exists for employees below the age of 30 with a Masters degree).

      € 53.918 * 70% = € 37.743 which is the minimum salary norm if the 30% ruling has been granted. An amount of € 53.918 – € 37.743 =€ 16,175 is the actual tax free allowance.”

  2. Ankit Labh
    Ankit Labh Posted on 03/19/2019 at 22:52

    I have an issue:
    1) I joined TUDelft as a phd in June2018 ans was eligible for 30% ruling.
    2) somehow I finally got acceptance on Jan 2019 with the remark that you will only get it from the current year.
    3) It suggested to ask for tax refund to compensate loss in 2018.

    Now suggest me how to do this, be specific.

    • expatrepublic
      expatrepublic Posted on 03/19/2019 at 23:23

      We have sent you an e-mail with more details!