What Is the 30% Ruling for Expat Employees?

What Is the 30% Ruling for Expat Employees?

The 30% ruling is a tax exemption in the Netherlands designed to attract highly skilled expatriates. It allows eligible employees to receive up to 30% of their gross salary tax-free, compensating for the extra costs (referred to as "extraterritorial costs") incurred when relocating to work in the Netherlands.

Eligibility Criteria

To qualify for the 30% ruling, both the employee and employer must meet specific conditions:

1. Employee Requirements:

   • Highly Skilled Status: The employee must possess specialized skills or expertise that are scarce in the Dutch labor market.

   • Income Threshold:

     • For 2024, the annual taxable income (excluding the tax-free allowance) must exceed:

       1. €41,954 for employees aged 30 and above.

       2. €31,891 for employees younger than 30 with a master's degree.

     • Lower thresholds may apply for PhD graduates or researchers working in certain fields.

   • Employment Abroad: The employee must have lived at least 150 kilometers from the Dutch border for 16 out of the last 24 months before starting the Dutch job.

   
   

2. Employer Requirements:

• Must be a registered Dutch employer or a recognized wage tax withholding agent in the Netherlands.

• Must agree to apply the 30% ruling to the employee’s salary package.

Application Process

1. Filing the Application:

   • The employee and employer jointly apply to the Dutch Tax and Customs Administration (Belastingdienst) for the 30% ruling with FinTaxNL Solutions assistance.

   • The application must be submitted within four months of the start of employment to ensure retroactive benefits.

     Required Documentation:

   
   

2. Required Documentation:

   • Proof of eligibility, such as employment contracts, salary details, and evidence of prior residency outside the 150-kilometer zone.

   
   

3. Approval:

   • If approved, the ruling applies from the start of the employee’s contract or the date of application (if submitted after four months).

   
   

4. Duration of Benefit:

   • The ruling is valid for a maximum of five years as of 2019 (reduced from the previous eight years).

Tax Benefits for Employees

1. Tax-Free Allowance:

   • Up to 30% of gross salary (including benefits) can be paid tax-free, reducing the employee’s taxable income significantly.

   
   

2. Additional Allowances:

   • Employees under the 30% ruling can opt for partial non-resident tax status, meaning they are only taxed on Dutch-sourced income for certain investments and savings.

   
   

3. Relocation Costs Covered:

   • The tax-free portion can offset extraterritorial costs, such as moving expenses and international school fees for children.

Tax Benefits for Employers

1. Attracting Global Talent:

   • The ruling helps Dutch employers compete globally by offering a significant financial incentive to expatriates.

   
   

2. Reduced Administrative Costs:

   • The tax-free portion simplifies compensation for relocation costs without requiring additional reimbursement arrangements.

   
   

3. Enhanced Employee Retention:

   • Employees benefiting from the ruling may find Dutch employment more appealing, fostering long-term collaboration.

Key Considerations

1. Periodic Review:

   • The eligibility and benefits are subject to review if employment terms or salary conditions change.

   
   

2. Retroactive Claims:

   • Applications filed after four months of employment can only apply the ruling prospectively.

   
   

3. Compliance:

   • Employees and employers must ensure they meet all requirements to maintain eligibility throughout the ruling period.

The 30% ruling is a significant incentive for expatriates and their employers, making the Netherlands an attractive destination for international talent.