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Welcome to the 30% Ruling!

Categories: Finance,Tax

The 30% ruling is a tax benefit for knowledge workers who come to work in the Netherlands, and it is very advantageous (if you qualify).Conditions apply and we will try to make it less confusing, so please take a few moments to get familiar with it. Your investment of time now could save you hassle and money later.

What is the 30% ruling?

The 30% ruling is a Dutch tax facility aimed at attracting foreign employees with specific skills or expertise to the Netherlands, subject to certain conditions which we explain further on.

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Why is it important to me?

It means you get more take-home pay. A third of your gross pay will be paid to you as tax-free reimbursement for expenses you would not have if you had stayed home (called “extraterritorial expenses”). The other 70% of your salary is taxed in line with the law.

An illustration might help here. Your remuneration is a white sack. Let’s take a third of the stuff out and put it in a blue sack. The rest goes in a box and is taxable; the amount in the box gets smaller as tax and social contributions are withheld and paid. The part we have set aside in the blue sack remains unchanged; it is tax-free up to 30% of your remuneration package. And you do not have to provide receipts or claim the expenses.

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Hirers can also opt to pay for items such as housing or health insurance expenses, but those stay in the box. They are considered income for you, and you will be liable for tax on them.

There is one caveat: It is only valid for five years and as long as you continue to meet the criteria. More on that later.

What are the rules?

You have to meet certain criteria to apply and to qualify.

    1. You are hired from abroad or are posted to the Netherlands.
    2. Hold specific expertise that is not readily available in the Dutch labor market.
    3. Your salary meets a minimum level – see here
    4. You have not been living just across the Dutch border (a minimum of 150 km is required) and want to move here. (See below for details)
    5. You are paid through a Dutch payroll and the salary is subject to Dutch withholding tax. (See below for details)

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I meet those requirements. How do I apply?

Payingit International files the application for you (with support from a tax advisor). We are an umbrella payroll company, so we are, in effect, your employer. The application takes some work and the answer takes time to come through. You want to get it all set up within four months of your start date; if your application is filed more than four months after you start, you won’t get the full benefit. You will miss some months.

What else do I need to know?

It’s portable. If you change jobs and already have the 30% ruling, you can take it with you – provided you get a job within three months. If you change jobs, it’s up to your new employer to notify the tax authority. (Payingit International does this for clients. Keep them informed of any changes!)

Five years: The ruling is granted for a maximum of five years. It can be less if you have worked or spent any time in the Netherlands previously.

Watch your salary level. During those five years, you must continue to meet the salary norm. If you earn less than the 30% ruling requires, you lose it backdated to 1 January of that year. If the employment agreement ends during a calendar year, the salary norm can be prorated accordingly.

Very important: You only get it once. If you meet the salary norm again at a later stage, the 30% ruling cannot be applied to you again.

What are the extraterritorial expenses exactly?

Things like this can qualify:

  • Cost-of-living allowances (COLA)
  • Expenses for a trip to find a place to live and look around, find a school for the kids
  • Double housing costs – if you have a residence at home to pay for
  • Extra housing costs
  • Travel for home leave
  • Costs for visas, permits, host country income tax return preparation
  • Language courses

More on this on the Belastingdienst website in English

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Important conditions related to the 30% ruling

In addition to the items in What Are the Rules (above), the following conditions apply:

  • You (both the employee and your employer) must have received an official notification from the Dutch tax authority that the 30% ruling can be applied. The maximum duration is five years.
  • Specific expertise has to be evaluated and agreed on by the Dutch tax authority. They look at:
    • The education level of the employee
    • Relevant work experience (two and half years in a similar role is considered sufficient)
    • Salary level high enough to prove your expertise.
  • You must meet a specified minimum wage level. This level is determined by the tax authority every year. There is one salary level for people under 30 and another one for people over 30.

Click here for the current salary norms for the 30% ruling.

  • You have to have been living at least 150 kilometers from the Dutch border for two-thirds of a 24-month period prior to starting your job in the Netherlands.

What else should I watch out for?

Apply early. To have the 30% ruling apply as of the start date of the Dutch employment, the request should be filed within four months of starting work activities in the Netherlands If the request is filed after that, the 30% ruling is granted as of the month following the month in which the request for the 30% ruling was filed.

In case you missed it: Once your salary falls below the salary norm, you lose the 30% ruling.

Payingit International

Payingit International is responsible for preparing the application (they collaborate with a specialist). Advance work is needed, and it can take time. Payingit International charge a fee for the application process which will be discussed with you in advance. In most cases, there is no fee for any consulting hours that might be needed.

The current salary norms for the 30% ruling are posted on the Payingit International website. These figures are updated whenever new information from the tax authority is received.

To see the full impact of this on your pay package, try out Payingit International’s handy dandy Payroll Calculator.