The Dutch 30% ruling: what is it?

Based on the Dutch 30% ruling, employers can pay out 30% of the normal salary to its employee tax free. However, instead of this 30%, the real expenses (conditions apply) relating to working outside the home country may be reimbursed, such as school fees for an international school.

The Dutch 30% ruling is mainly a benefit that applies to wage tax (similar as PAYE). However, it comes with other benefits that apply to personal income tax.

The ruling can only apply to employees. For Freelancers/self employed, there are workarounds available, see below.

To obtain this ruling, certain conditions will need to be met. The main condition is that the employee should meet a certain salary level. This level changes each year, see below.

The 30% ruling can be applied for a maximum period of 5 years.

What is the purpose of the 30% ruling?

In reality, the objective is to make the Netherlands more attractive for foreign employees that have skills that are scarce on the Dutch labour market. Thus, they should give a boost to the Dutch economy. Officially, this tax-free allowance is implemented to cover the higher expenses that expats generally incur compared to “normal employees”. For example, higher travel expenses, moving expenses etc.

Also part of the 30% ruling: partial non-resident status:

In addition to the tax free 30% allowance, employees may opt to be treated as “partial non-resident”. This is often considered a very favourable tax incentive.

If a person chooses for partial non-residency, it means that this person is assumed to live outside the Netherlands (non-resident) for certain types of income. However, the home country generally also considers this person as non-resident. Therefore, in practice, it basically results in a tax exemption on so-called unearned income from Dutch and foreign sources (such as interest and dividends, income from real estate, crypto’s).

Note that this exemption also applies to substantial shareholdings in a non-Dutch company (interest of 5% or more). As such, this ruling may be an interesting (retirement-) tax planning option.

This exemption does not apply to Dutch resident real estate.

Please be aware that in less than 1% of the cases, it may not be attractive to choose for partial non-residency. This often depends on the national tax rules of the home country or where the employee has invested funds or owns a business.

Americans (and green card etc holders) and the 30% ruling: additional beneficial rules.

For Americans with the Dutch 30% ruling, who also physically work outside the Netherlands another tax exemption applies.

Based on this exemption, income relating to the days physically worked outside the Netherlands are also exempt from Dutch tax. Although it requires a pretty complicated calculation and keeping a tax calendar, but the additional administrative work is generally worthwhile. 

It is important to consult your CPA before applying this advantageous rule.

If you need a reliable CPA, please let us know. We are happy to refer you to one of our reliable contacts, for example via the International Practice Group (IPG).

How to obtain the Dutch 30% ruling and which requirements must be met?

Roughly speaking, the following requirements apply in order to obtain the 30% ruling:

• The employee MUST be attracted to work for the employer while the employee is still a non-resident. Also, if a person already lives or has lived in the Netherlands before (or within a 150km distance from the Dutch border), the change to obtain the ruling is slim if not impossible. Exceptions may apply.
• The salary (excluding the allowance) should have a certain minimum level: roughly speaking, EUR 41,954 (2023 level), or EUR 31,891 if younger than 30 years and in possession of a Dutch master’s degree or equivalent.
• There is no minimum income requirement if a person will perform scientific research work for qualifying organizations or for medical doctors in training.
• The application can only be made jointly with an employer. An employer is not obliged to cooperate. Also, in our experience, not every employer is willing to cooperate (to avoid inequality in between the staff). Therefore, check with your potential employer whether he is indeed willing to cooperate.
• The relationship employer/employee must be based on an employment contract. There is a work around for free lancers, see below.
• The employer may apply a lower percentage than 30% (part of the contract negotiations).

What about 30% ruling icw net salary arrangements (tax equalization, hypo-tax etc)?

Even if there is a net salary agreement (or similar), it may still be attractive to apply for the 30% ruling. These types of contracts are often applied by Shell.

The financial benefit of the ruling will in that case often benefit the employer only. However, the employee may still benefit from the possibility to opt to be treated as partial non-resident (see above).

US-persons with tax equalization and the 30% ruling should be careful with accepting the contract.

Can the Dutch 30% ruling be applied to Freelancers / self employed persons?

As mentioned above, the ruling can only apply to employees, so freelancers generally cannot benefit from this ruling. However, there is a workaround that generally works. Contact us to discuss whether this workaround is advantageous for you.

Also here, you should be a non-resident prior to setting this up!

How can Langendorff Tax Consultancy help you?

• Advice whether applying for the ruling will be successful. Will you meet the requirements? Draft calculations to see whether it is worthwhile in your case (it generally is).
• The entire 30% ruling application procedure can be dealt with by us based on a fixed fee. Based on a power of attorney and 25 years experience in international tax we can represent both the employer and the employee.
• Change of employer: advice and re-applications (mind terms!)
• Objection /litigation procedures in case the 30% application is not granted (this does not happen often).
• The employment contract must contain a reference to the 30 % ruling. As such, we can help amending the standard contract which will generally not contain any such reference.
• Advice about the contract itself after the 5 years term: Will the employer compensate the loss of net salary after the Dutch 30% ruling no longer applies?
• Advice re the financial situation after loss of the 30% ruling (either due to change of employers or after the 5 years period).
• Filing of tax returns: The 30% tax status may make the tax returns more complex. Especially the migration returns (to be filed when getting into the Netherlands and going out again) are complex, errors are often made, and tax refunds may be missed. International tax expertise is recommended.
• Coordination with your tax advisor in your home country. Your Dutch tax situation may affect your tax obligations in your home country.
• You to be and remain compliant: the Dutch tax authorities are highly efficiently organized, and compliance is therefore very important. We take over that responsibility.

Give us a call if you have any questions. We are always interested to hear your story!