The Dutch 30% ruling
The 30% ruling is a Dutch expatriate tax regime. It is designed to facilitate the hiring of employees with special skills or expertise from abroad to the Netherlands.
Under application of the 30% ruling, the employer may pay out part (thirty percent) of the employee’s salary tax free.
Essentially, the 30% ruling allows the employee to receive a higher net salary without an increase in employer’s costs.
Apart from the usual obligations connected with payroll processing, there are no other responsibilities or liabilities for the employer.
The tax-free allowance is intended to cover so-called extraterritorial costs (regardless of the actual amount of any such costs incurred), which are costs that originate from the fact that the employee is working in a different country than his country of origin.
The employer and employee do not have to prove the existence of such extraterritorial expenses to receive the tax-free allowance.
The Dutch tax authorities may grant the 30% facility to foreign employees who are hired (i.e. payrolled) from abroad by a legal entity or branch based in the Netherlands, and who meet certain additional conditions (see further below).
It is therefore worth bearing in mind that simply moving to the Netherlands as a self-employed individual / without being hired / payrolled by a Dutch entity or branch, it is not sufficient to take advantage of the 30% ruling as the facility is designed to be applied via a Dutch payroll and not by filing a Dutch tax return.
It is also worth noting that the 30% ruling, once granted, is applicable to all wages from current employment (including e.g., bonus amounts, equity incentives and the private use of the company car) but not to severance payments.
An important additional benefit of the 30% ruling is the fact that the employee may choose to be treated as a non-resident Dutch taxpayer for income derived from substantial interests (owning 5% or more in a company) and income from savings and investments.
This also means that other non-employment income not sourced from the Netherlands (such as for example from rental property located abroad) will also not be taxable in Holland.
The main eligibility criteria for the 30% facility are:
The employee needs to be recruited from abroad or assigned from abroad to the Netherlands.
Non-resident directors of a Dutch company may also qualify for the facility.
The employee must have been living, prior to his recruitment or assignment to the Netherlands, at least 150 km from the Dutch border during 16 out of 24 months.
However, this condition does not apply to PhD students who graduate or have graduated in the Netherlands (or within the 150 kilometer-radius) and have started their employment in the Netherlands within one year of graduation.
The employee needs to earn a taxable employment compensation of at least €38,961 (this minimum threshold was €38,347 in 2020 and €37,743 in 2019).
Alternatively, if he/she is younger than 30 years of age and has a Dutch master’s degree (university level) or foreign equivalent, the minimum required salary is €29,616 (this minimum threshold was €29,149 in 2020 and €28,690 in 2019).
Employees must have specific knowledge or expertise that is scarce on the Dutch labour market.
The specific expertise requirement is deemed to be fulfilled if the salary thresholds mentioned above are met.
Furthermore, employees should fulfil the specific expertise condition on a continuous basis.
In other words, they have to meet the salary requirement throughout the entire period for which the 30%-facility is granted.
If the salary requirement is not met at any given time, the 30% facility will cease to be valid (even if it has already been granted) immediately with retroactive effect for that year and can no longer be used.
Application of the 30% ruling must be agreed in the employment agreement or an addendum thereto and submitted as a joint request for (or on behalf of) both employer and employee.
The 30% ruling may be applicable for a maximum period of 5 years / 60 months.
The Dutch Government had previously decided to shorten the maximum applicable period from 8 to 5 years from 1 January 2019.
However, after a series of consultations, they have revised the end date of the previous maximum 8-year period to 31 December 2020 for 30% facilities with an original end date between 2021-2023.
For those 30% facilities originally ending in 2024 or later, the revised end date of the 30 ruling is 3 years less the original end date.
30% rulings where the original end date was in 2019 or 2020, have remained unchanged with an 8-year maximum period being applicable.
Note that any periods, exceeding 20 days in each calendar year, of earlier work or stay in the Netherlands, in the prior 25 years, will be deducted from the maximum period of application.
Furthermore, if the presence in the Netherlands has been for personal circumstances and was:
(a) no more than six weeks each calendar year; and/or
(b) a one-off continuous stay of 3 months, the duration period of the 30%-facility will not be reduced by these periods of previous stays.
The 30% ruling must be filed within 4 months after the start of the employment to obtain retroactive effect to the start date of the employment.
A later application may still be successful, but the start date of the 30% ruling will then shift to the first day of the month following the application and the first months will be deducted from the maximum period of application.
If the employee changes employment and if he/she and their new employer wish to continue the 30% ruling, a new request must be filed for the new employment.
The period between the end of the old employment and the beginning of the new employment may not exceed 3 months.
The 30% ruling application must be made in writing, using a paper form (link provided in this article below) and sent to the Belastingdienst (Dutch Tax Office).
The application must be supplemented with supporting documentation (see below for a checklist of documents to enclose).
Ideally, a complete request is made with the initial submission, meaning that all the required information and documentation is provided in one instance.
This facilitates the application process and improves the chances for a speedy and favourable decision.
However, an incomplete application may at times need to be submitted in order to meet the deadline.
The deadline for the initial application is 4 months after the start of the employment for which the application is made so that it can have retroactive effect from the start of the employment.
Processing time is usually between 8 and 12 weeks after submission of the complete application to the Dutch tax authorities.
An incomplete application will still be considered as valid in terms of meeting its deadline.
Therefore, if not all necessary information is available within 4 months after the start of the employment, an incomplete application is still submitted to “save” the deadline.
The Dutch tax authorities will then ask for any missing information and allow for some additional time to provide it thus delaying their decision.
In anticipation of a positive outcome, the 30% ruling may be applied to the payroll even though it has not yet been formally granted. However, in this scenario, in case of a subsequent refusal, the payroll then has to be adjusted and the tax free cost allowance taxed.
An employee has a salary of €150,000 and meets all the other conditions to qualify for the full 30% ruling. This means that after applying the 30% ruling to his payroll, his taxable salary will be €105,000 thus enjoying a tax-free allowance of 45,000.
Another employee has a salary of €55,000. If the 30% ruling would be applied in full to her payroll, her taxable salary would be €38,500. This is lower than the mandatory salary and therefore not allowed. In this case, she would only benefit from the 30% ruling partially, for a maximum amount of €55,000 minus €38,961 (the minimum salary threshold requirement for 2021) = €16,039 tax-free allowance.
It is possible to apply for the 30% ruling directly yourself.
Cases of employers and employees successfully filing the application on their own are not uncommon.
The requirements and supporting documentation don’t change.
However, this option should be carefully considered as the application might be denied if the Dutch tax authorities, for instance, review the employment contract and it does not contain the necessary and legally compliant language.
In fairness, not all parts of the application and supporting documentation may always be fully reviewed during the application process.
However, if there is a subsequent audit on the Dutch employer which picks up on information being supplied as being non-compliant with the granting of the 30% ruling, it could lead to a retroactive denial.
If both employer and employee wish to proceed with a joint application on their own, they will need to complete the 30% ruling application form (link here) and send it to the address provided.
It is always advisable to send the complete application and all supporting documentation by recorded delivery which includes confirmation of delivery.
The Dutch tax authorities will then send a letter confirming receipt and subsequently, within the time frame previously mentioned of 8-12 weeks, either:
If the Belastingdienst request additional information as a result of documents being missing, you should send the requested documentation as soon as possible.
However, if Dutch Tax Office has specific questions which are technical in nature, you may want, at this stage, to enlist the help of an expert professional on 30% ruling applications.
Should the application be denied, an objection can be filed within 6 weeks.
If, the Dutch tax office, upon reviewing your objection, still denies the granting of 30% ruling and in the meantime, it was being applied to the payroll, then an adjustment is needed.
The adjustment will more than likely result in the 30% tax free allowance enjoyed until that point due to be paid back either as a one-off payment to the Dutch tax office or, if possible, spread over the course of the next few payrolls as an additional deduction.
If the 30% ruling is granted, employee and employer should check the confirmation letter and ensure the data reported (i.e. company wage tax number, BSN number, the duration of the ruling, etc.) on it is correct.
If any details are incorrect, you should reply to the letter within 6 weeks highlighting any discrepancies found.
Once all details on the confirmation letter have been verified to match those on the application submitted, the 30% ruling can be applied to the monthly payroll.
If the 30% ruling was already being applied in anticipation of a positive outcome, then no adjustment is needed.
However, if the employer’s payroll up until that point did not apply the 30% facility already, the 30% tax free income can be applied retroactively until the start date of the 30% ruling.
This can be done as a one-time salary recalculation which will result in a refund being issued.
It is also worth mentioning that the 30% ruling is subject to an annual review by the Belastingdienst and therefore it is advisable that each year-end all the relevant information is checked to ensure it is still up to date and accurate.
Regular employment income from the current employment is the basis for calculating the 30% tax free allowance.
Special rules apply to pension premiums. However, bonuses, holiday allowance, benefit package and company car all fall under the 30% ruling remit.
Severance payments do not fall under the 30% ruling definition of regular employment income from the current employment and therefore do not qualify for the 30% tax free allowance.
If an employee is made redundant, it is important that they have a breakdown of the redundancy package so it can be determined which part is payment in relation to bonus, outstanding holiday allowance, etc. and which part is the actual severance payment.
Stock options, RSU, shares incentive plans and other equity relating income follow the general principle that the basis of the 30% ruling is the income from current employment that is earned during the period in which the 30% ruling is applicable.
In general, the 30% ruling does not apply to salary that becomes taxable after the termination of employment.
This means that prima facie it is not possible to apply the 30% ruling on stock options that become taxable after the last day of the employment.
However, when such income becomes taxable in the month following the month of termination, the 30% ruling may still be applied (provided it is still within the granted duration period).
It is therefore often more beneficial to exercise options before (or immediately after) the termination of an employment in order to take advantage of the 30% ruling for this type of income.
No, the employer is under no obligation to file a joint application with the employee/s.
If you are employed in Holland and have been granted the 30% ruling, it is still possible to start your own business and keep the benefits of this facility.
Your business should be set-up as a B.V. that pays you an employee salary.
The B.V. should then apply for the 30% ruling on your behalf.
The application should be submitted within 3 months of changing employment and the employment contract needs to contain the appropriate wording required for a successful 30% ruling application.
Employees recruited from within The Netherlands can still successfully apply for the 30% ruling.
They will have to demonstrate that either:
There are some other caveats and conditions to be met but ultimately employing someone who is already in The Netherlands does not automatically deny granting of the 30% ruling.
Currently there are no caps. Therefore, even if someone had a 100 million euros salary, if they are granted the 30% facility, their taxable salary will still be 70 million euros with a 30 million euros tax-free allowance being granted.
It is indeed possible to obtain the 30% ruling for a new employment, as this is a change of employer situation which is allowed under the 30% ruling.
However, there is still an application to be filed so that the Dutch tax authorities can review if the 30% ruling can be continued with the new employer.
The usual eligibility criteria will apply and, in addition, the gap between the end of the old employment and the start of the new employment may not exceed 3 months.
Scientific researchers, employees working in scientific education or doctors in training, have no minimum salary requirement. However, there are restrictions on the companies or institutions this group of employees can work for.
If you didn’t apply for the ruling despite being eligible for it (for example because the application was never submitted or the employer did not want to be part of the process), it may still be possible to apply.
You might have missed one or two years of the 30% facility benefits but it is still worthwhile to obtain the ruling.
The Belastingdienst will just reduce the total duration of the ruling by the period you have already resided in the Netherlands.
The 30% ruling is not discriminatory per se against Dutch nationals.
What is important is that the employee has lived outside the Netherlands for sufficient time, so that any periods of earlier work or stay in The Netherlands, that would reduce the maximum period of applicability of the 30% ruling, can be ignored.
Any periods of earlier work or stay in The Netherlands that ended in the 25 years prior to arrival for the new role in Holland need to be deducted from the maximum period of applicability (5 years / 60 months).
As mentioned above, there are some exceptions to the period taken into account for this rule like for example brief visits for holiday, family, and limited days of work in the Netherlands.
An individual does not have to be an expat to meet the requirements of the 30% ruling.
A local hire under a standard Dutch employment contract may also be eligible for the 30% facility.
The Dutch tax authorities have clarified they will take into account employee’s income from current employment.
This effectively means that someone receiving a split salary paid part in The Netherlands and part in a foreign location will have the entire worldwide income counted towards the minimum salary threshold to qualify for the 30% facility.
There are no specific rules for part-timers hence you should assume the usual threshold used for full-time workers remain applicable in determining eligibility for the 30% ruling.
Yes, special provisions do exist for employees on parental leave.
Yes, it is. Employers are under no obligation to agree to it. In practice though, this mechanism is often well-aligned with the pension providers.
The Belastingdienst have clarified they consider garden leave payments not as income from current employment if it extends to more than one month following the month in which the active employment activities are terminated.
Continuation of the 30% ruling with another Dutch employer may also be jeopardized when there is more than three months’ time between the start of gardening leave and the date a new employment agreement with a new employer is executed.
A specialist in global mobility and international tax services is well positioned to assist with:
Contact us should you require further clarifications on the 30% Dutch ruling and/or have a look at some of the other insights we have published.
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