We are continuing the ‘Taxation system‘ topic. This time we will tell about 30% tax benefit, as we promised. The 30% ruling is a tax advantage for a highly educated foreign employee, working in the Netherlands. It was created to make relocation to the Netherlands more attractive. And also to attract foreign investors. So, what is a reimbursement ruling? How can you get it? What are the benefits of it? We prepared answers on all these questions and more.
The 30% Tax Ruling in Detail
If a number of conditions are met, employers are allowed to grant a tax-free allowance amounting to 30% times 100/70 of your gross salary subject to Dutch payroll tax. Thus results in a maximum tax rate of approximately 36.4%. This tax-free allowance is considered as compensation for expenses a foreign employee will have for working outside his/her home country.
So, what are the benefits? First of all, 30% of your salary may be paid as a tax-free allowance for extraterritorial costs. Secondly, you can opt to be treated as a non-resident taxpayer. Apart from that, you can receive a tax-free allowance to the cost of having your children attend an international school.
- You must have specific skills or expertise that are hard-to-find in the Dutch labor market. These skills are determined by several aspects, such as salary, age, your employment history, education and level of employment. None of these are conclusive. It is the combination of all aspects that will determine your specific skills. It is the most important factor, and, since January 1st, 2012 the assessment has been based on an objective salary threshold.
- To claim the 30% ruling, you must be recruited outside the Netherlands by a Dutch employer. You have to prove that before you came to the Netherlands to this tech position, you lived at least 150 km from Dutch borders. The validity of this condition with EU law is still uncertain.
- Your employer must be a mandatory withholding agent for Dutch payroll tax.
- You and your employer must also agree to have 70% of the salary paid as a taxable salary and 30% as a tax-free allowance.
Specific expertise text involves the following:
- Dutch taxable salary, excluding the 30% ruling’s tax-free allowance, must be at least €37.000 (in 2016 it was €36,889);
- A lower salary threshold of €28.125 per annum applies to employees younger than 30 years old with a Master’s degree (attained outside the Netherlands). In 2016, it was €28,041.
The maximum period to be granted the 30% ruling is 8 years. Periods of previous stay and employment in the Netherlands are deducted from the maximum duration of 8 years.
Other reimbursements and allowances
Under the 30%, your employer may pay 30% of your total salary as a tax-exempt reimbursement for expatriate expenses. Any other reimbursements of expatriate expenses will be considered as taxable income or should be deducted from the 30% tax-exempt allowance. If the actual expatriate expenses exceed 30% of your total salary, however, the actual expatriate expenses may be paid tax-exempt to the employee.
The 30% ruling may affect an amount of your pension rights that can be accrued tax-free while working in the Netherlands. The 30% ruling can also affect the amount of Dutch social security contributions (if applicable) and your social security rights. By the way, if you will be transferring from one employer to another, get ready to request the ruling again.
How and when to apply
The 30% ruling becomes effective retroactively if the application is submitted within 4 months after starting his/her employment contract. In a case where the application is submitted after 4 months, it still can become effective as of the first day of the following month after submitting. Only, in this case, you will lose some money. The 30% ruling is a joint application. You and your employer should discuss its aspects and both sign and fill the application with the Dutch tax authorities.
Tax and Customs Administration Office (Belastingdienst)
For general questions: 055-538 5385
For questions regarding 30% ruling: 088-154 2955 or 088-154 2862
Or you can send email to dienstverlening.Expatcenter.Adam@belastingdienst.nl