In the event you are being made redundant and a severance payment is being offered to you, then this has an effect on the 30% ruling.
What is the 30% ruling in a nutshell?
The 30% ruling is a tax incentive for expats that basically comes down to 70% of the gross salary being the taxable salary and 30% of the gross salary being the tax free reimbursement of costs. In order for the expatriate to qualify for the 30% rule certain criteria need to be met and an application needs to be made. When the ruling is granted by the Dutch tax office to the employee, the maximum period of time the ruling can be used is 8 years. This expatriate ruling is the best tax benefit Holland has to offer.
30% ruling and severance payment
The 30% ruling only applies to salary earned on current activities performed for the company. That implies a reimbursement granted due to the number of years you were in service of the company does not qualify for the 30% ruling to be used. It is therefore key to split the severance package in the part of previous years and the part related to this years income. For instance for commission that you were still entitled to or other reimbursements.
Basically in can be stated that the 30% ruling does not apply to severance pay.
Is the ruling lost for ever?
That depends. If you cannot find another employment within a three month period from the date you have been dismissed, then you have lost the ruling for ever. You also lose the ruling for ever if you start a ZZP or other private entrepreneur activities, as you are no longer employed. The taxes for expats in the Netherlands are significantly reduced with the 30% ruling. Hence for Dutch expats it is important to keep this fiscal incentive.
Expat jobs in the Netherlands are not easily found. What you could do and what is done frequently is setting up your own limited liability company where you employ yourself as managing director. If you arrange for this within a three months period, then you can still apply for the 30% ruling, while you are working like a freelance ZZP structure or while being a entrepreneur operating within a limited liability structure.
Orange Tax Services team
The orange tax services team can assist the employee losing his job with the incorporation of the limited liability company. Whether this is a Dutch BV company, UK Ltd, or German GmbH, is not relevant, as long as the company is a limited liability company.
We assist the expat with the implementation of the 30% ruling, the setup of the payroll and the set up of the bookkeeping. The monthly, quarterly and annual tax obligations we process for you against the offer made to you at the start. Feel free to contact us.