Who qualifies for the 30% ruling?
The 30% ruling is a facility the Dutch tax office provides to employees that have been attracted from abroad by a Dutch employer, who earn at least EUR 53.000 annually, have not lived closer to the Dutch border than 150 km in the 24 months before their arrival and have not lived in the Netherlands during the past 25 years. The EUR 53.000 minimum required salary can be a EUR 40.000 minimum required salary when the employee is under 30 years old and holds a master degree. For scientific staff no minimum required income exists.
What period is the 30% ruling valid?
The ruling is issued to you for a 8 year period. However, when you have during a year not met the minimum required income, you lose the ruling immediately. The same is the case when you are unemployed for more than 3 months. If you switch employers, you need to reapply with the new employer and then the 8 year period is continued.
What tax advantage does the 30% ruling have?
The 30% ruling implies that 70% of your gross salary is taxed and 30% is tax free. Moreover, you can chose to be regarded a deemed non resident tax payer and then you do not need to report your world wide assets. Moreover, you can swap your non Dutch drivers license for a Dutch one. So can the tax partner of the ruling holder.
Applicable tax rate with the 30% ruling
The regular Dutch tax rates apply to the taxable income under the 30 percent ruling. The taxable income is 70% of the gross income. The 30% ruling also applies to the remunerations in kind, such as for the company car. And commission, result from exercising stock options provided by the company, any other payment you receive from your employer is subject to the 30 percent ruling. The exception is the severance payment, that is excluded from the 30% ruling.
Mortgage deduction and 30% ruling
The mortgage deduction implies that the costs related to the loan taken out to purchase a home being your main residence can be deducted from your Dutch taxable income. Also the costs of loans taken out to purchase a kitchen, bathroom, new roof can be deducted from your taxable income.
These costs are deducted in Box 1. Some 30% ruling holders have the assumption that their tax rate is 30 percent. That is not the case. Their tax rate is the normal rates, being 36,5% over the first EUR 19.822. 42% over the following EUR 37.763 and 52% over the taxable income exceeding EUR 57.585. Against that tax rate the deductions are set off.
The amount of mortgage deduction is limited by the WOZ value of the house you purchased. That WOZ value times 0,75% is the amount you cannot deduct the mortgage costs for.
We recommend Expat Mortgages as the expert in mortgages for expats and 30% ruling holders.
Study costs deduction
During the period you are a Dutch resident tax payer you can deduct the costs of your study if that study is done to improve your economic position in the Netherlands. That implies a Dutch language course is not accepted as such by the Dutch tax office, but for instance an MBA course is tax deductible.
Deductible are the tuition fee and material costs. Not deductible are transport and housing costs. The maximum amount you can deduct per tax year is EUR 15.000 and a EUR 250 threshold is taken into account.
If you follow the study for instance in the coming three years and you do not have employment income during this time, you need to file now for each year you studied the income tax return. The deductible costs will make you have a negative taxable income. This negative income will be set off against the positive taxable income you will have after you finished the MBA study and you find employment. In other words, the costs over the years are not deducted in the year you actually have taxable income, it is done in the years before.
30% ruling and tax deductions
Your mortgage and or study costs deduction are set off against the 70% taxable income under the 30% ruling. Some have the opinion that it is better to terminate the 30% ruling, pay more tax, so you can claim more tax back.
To be frank, this is a bit silly. You voluntarily chose to pay more tax to the tax office is rather uncommon, only to be able to claim slightly more tax deductions. In the end the tax office will still get more tax in. Moreover, the 30% ruling is for an eight year period and you might not study eight years or own a house eight years.
Yes with the 30% ruling you can claim less tax back for the simple reason you pay less tax. But paying lesser tax over your annual income is still much more profitable than being able to claim more tax back over the study costs you made.
Orange Tax Services
We have substantial expertise and experience with the 30% ruling. We can assist you applying for the ruling at a fixed fee. If you have issues with the application you made, we can assist. If you already have the ruling but you would like to switch jobs, we can assist. If you would like to start your own company, we can make it happen that you can continue the 30% ruling for the remaining period in your company. If your employer has no presence in the Netherlands, we can still arrange for a payroll situation and that makes it possible to apply for the 30% ruling for you.
In other words, if you have an issue with the 30% ruling, do not hesitate to contact us.