30% ruling for expat employees in the Netherlands explained
What the conditions are for the 30% ruling for expat employees in Holland and how to apply for it
What is the 30% ruling all about?
The 30% ruling is an incentive created by the Dutch Government to attract knowledge and skills from abroad to the Netherlands. The normal Dutch income tax rates are such that most knowledge employees gravitate towards the United Kingdom, for example, not the Netherlands. The tax rates in the Netherlands for expats are generally regarded as being on the high side.
The 30% ruling was introduced in order to make the Netherlands more competitive in the region. Its main thrust is that 30% of your gross taxable income is assumed to be a reimbursement for the costs involved for expats working in the Netherlands. The native Dutch usually have just the one house they are living in, and are familiar with the language and culture of the country. Expatriate employees often have another house in their country of origin, leading to double housing costs. They have also incurred costs for moving their family and belongings to the Netherlands. They are then faced with further costs to learn the language and customs. These are all practical kinds of things which cost money that the average employer will not reimburse. Hence the 30% ruling.
Moving to the Netherlands becomes more attractive with the 30% rule.
How to qualify for the 30% ruling?
Attracted from abroad
There are requirements set by law that need to be met. To start with, the employee needs to have been attracted from abroad by a Dutch employer. This means that if you came to Holland yourself to study, or to live with your partner, or on your own initiative to look for a job, then you do not meet the requirements for the ruling.
There is an exception to this rule.
Doctorate degrees and the 30% ruling
If you came to the Netherlands to complete your Ph.D. Or doctorate study and were successful, meaning you can put the title ‘Dr’ before your name, then you can still apply for the 30% ruling even though you were not attracted from abroad by a Dutch employer.
150 kilometers distance requirement
If you have been attracted from abroad you need to have arrived from a distance of more than 150 km beyond the Dutch border. You cannot have lived during a 24 month period before your arrival in the Netherlands within a 150 km radius from the Dutch border. If, during the 24 months before your arrival you only lived for a short while within this distance, then you may still qualify. A short period is defined as less than 8 months.
The 150 km distance is not considered to be discriminatory. Within the EU, discrimination only occurs when certain nationals are excluded from a facility. Even though Belgium is wholly within the 150 km distance, this is not regarded as discrimination. It is the distance that applies and not the nationality, so any nationality living within this distance is disqualified. The EU high court has ruled that this is not a discriminatory measure.
Minimal income requirement
The minimal income requirement for the application of the 30% ruling is EUR 36.705 (2015), this being your taxable income. This implies that this amount is already 70% of your salary. If you take the 30% reimbursement out of your 100% gross salary, you have to divide the minimal income by 70, then multiply the result by 100 in order to arrive at the minimal gross income required to qualify for the full 30% reimbursement of costs.
An exception to this rule applies if you are under 30 years of age and you hold a Masters degree. Then the minimum income requirement is EUR 27.901 (2015). Again, this applies to the taxable 70% portion of your 100% gross income.
For scientific employees there is no minimum income requirement.
Please note that the tax authorities will check every year during the period the 30% ruling has been granted to you whether you meet the minimum income requirement. If you do not meet this criteria, the ruling is terminated immediately, for ever.
Moment of reference
The moment of reference which decides whether or not you qualify for the 30% ruling is the moment of your first arrival in the Netherlands. Whether your salary goes up after this moment or you obtain a Masters degree, then you still will not qualify for the 30% ruling as you did not meet the requirements at the moment of reference.
Switching jobs and the 30% ruling
If you switch jobs, then you may reapply with your new employer for the 30% ruling as long as you have not been unemployed for a period longer than 3 months.
Self-employed and the 30% ruling
If you are self employed through a so-called one-man company, then you are not an employee, hence you cannot claim the 30% ruling. However, if you are self-employed via a BV company or other limited liability company, then you are an employee of your own company and you can apply for the 30% ruling.
Non-resident employer and the 30% ruling
If you are seconded to the Netherlands to work for a foreign-based employer, then your employer may be registered as a non-resident employer. This status equals that of a resident employer for 30% ruling purposes, hence you can apply for the 30% ruling.
Applying for the 30% ruling
Both the employer and the emplyee have to make the application jointly. Only from the time the ruling is actually granted can the ruling be applied. If the application for the ruling was made within four months of the start of the employment, the ruling applies retroactively. If the ruling is applied for at a later stage, then the ruling starts in the month following the month the application for the ruling was made.
Other aspects of the 30% ruling
The ruling is valid for a maximum period of eight years. If you have stayed in the Netherlands for any period of time within the last 25 years, the total duration of this time is deducted from the maximum eight year period.
Exempted from wealth tax – 30% ruling
If you have the 30% ruling you can opt for a ‘deemed non-resident tax payer’ status. Even though you are living in the Netherlands, for Box 3 (wealth tax) income tax purposes you are considered a non-resident, with the exception to real estate situated in the Netherlands and share you have in a company exceeding 5%.
Being a ‘deemed non-resident’ means you are no longer able to claim Dutch tax relief for things like illness costs, study expenses, etc. If you would like to deduct your study expenses (for an MBA, for instance) then you have to choose to become a resident tax payer. Then you may deduct your study expenses – but at the same time you also need to declare your world-wide assets.
Deemed non-resident – US national – 30% ruling
A US national is obliged to file a US tax return based on nationality. If you have opted to be considered a deemed non resident in the Netherlands and you are a US national or US greencard holder, then you have become an actual non-resident living in the Netherlands. This implies you can deduct the Monday to Friday workdays spent physically abroad from your Dutch tax burden. Some conditions do though need to be met. In the USA the Dutch tax refund based on days worked abroad is subject to US income tax. Even so, this option can be very favourable.
Driving license swap and the 30% ruling
Having the 30% ruling allows you to change your non-EU driving license for a Dutch one, as may your tax partner also. Some say that this is a welcome opportunity given the reputed difficulty of the Dutch driving license exam. Those holding a non-EU driving license can only use that license for a maximum period of 6 months. After that they need to have an EU driving license. This license swap solves that problem.
Orange Tax Services – 30% ruling
We can assist the employer and the employee jointly with the 30% ruling application. We work on a no cure no pay basis for a fee of EUR 500. This means you pay nothing if the ruling is not granted, and you only pay EUR 500 if we are successful with the application. Our assistance rates are not based on whether you or your company already made an unsuccessful application, or whether you did not correctly understand the questions being asked by the tax office.