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30% ruling vs 183 day rule

What is the more favorable rule in the Netherlands, the 30% ruling vs 183 day rule.

183 day rule explanation

The 183 day rule is mentioned in the individual tax treaties we have. Per country the contains can vary due to the fact that not in every country the tax year is equal to the calendar year.

If we take for instance the United Kingdom. Then you are a UK tax resident that works under employment in the Netherlands. You prefer to pay tax and social premiums in the UK instead of the Netherlands, which criteria do you need to meet?

  • During the period of 12 months equal to the Dutch calendar year you cannot have worked for more than 183 days in the Netherlands, AND
  • Your salary is paid by an employer that is not a Dutch resident employer, AND
  • Your salary cannot be charged by the non Dutch resident employer to a branch or permanent establishment of that employer in the Netherlands.

That implies that if you are employed by a UK employer, working in the Netherlands, you spend less than 183 days physically in the Netherlands and your salary costs are not allocated to a Dutch branch of the UK employer. In that case you remain paying UK tax and social premiums over 100% of your salary.

Be aware of the fact that if you are single and working in the Netherlands, your tax residence has switched immediately from the other country to the Netherlands. That implies no 183 day rule, unless you stay less than 3 months, then you remain a tax resident in the other country. If you are married and you bring your family for the period, you have become a tax resident as well. No 183 day rule applies then.

30% ruling explanation – short version

You have been attracted from abroad by a Dutch resident company and during period of maximum 8 years only 70% of your Dutch gross income is taxed.

Conclusion

The 30% ruling is much more favorable. The requirements in order to qualify for the 30% ruling are easier to meet, the period during which you can use the ruling is set at max 8 years and you pay tax and social premiums over only 70% of your income, which makes that you pay less tax over the same income than you do in comparable countries in the European Union.

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