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 51.75%, 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 36.2%;
- 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 4 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 2019, employees must have a minimum annual taxable salary of €37.743 (or, €53.918 gross). For those holding a Master’s degree, who are younger than 30 years old, the minimum annual taxable salary must be no less than €28,690 (or, €40.968 gross). Scientific researchers, employees working in scientific education, 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 2019, the 30% ruling is granted for 5 years. For 30% rulings decisions granted before 2019 and which expire in 2019 or 2020 nothing changes. 30% ruling decisions granted before 2019 and which expire in 2021, 2022 or 2023 will remain valid until 31 December 2020. For 30% ruling decisions granted before 2019 and of which the date of expiration is 2024 or later the period of validity will be shortened to 5 years.