The 30% Ruling (De 30% Regeling) allows employers to pay skilled foreign employees 30% of their wages tax-free without them having to provide any further evidence of their expenses.
The idea is that expats are likely to have expenses that native workers don’t have, like managing a property abroad or travel expenses. Of course, if your expenses total more than 30% you can put in a claim with the necessary documentation.
The main objective of the 30% ruling is to attract employees with specific skills or expertise to work in the Netherlands, so unfortunately it’s not applicable to every expat. In order to be qualified, there are several conditions that the employer and employee must meet.
First of all, the employees need to have been recruited from abroad or assigned to the Netherlands from a Dutch firm, therefore they have to prove that they were living in another country before.
Before expats start their job in the Netherlands they must not have lived within 150 kilometres of the Dutch border for more than eight months out of the last 24 months prior to the start of employment in the Netherlands. The 150 kilometres condition is quite strict; 1 kilometre too close can jeopardize your qualification.
Further, the employer has to prove that the employee is integral to the company and that they could not successfully find someone else from the Netherlands for the position.
To fit the bill, as an employee you need to have specific skills or expertise that are scarce in the Dutch marketplace. To determine whether these skills qualify, the Dutch tax authorities will also take other factors into consideration, such as relevant work experience, age, salary, education level, etc.
Your gross annual salary is another factor that will be used to “measure” your skills; whereby a higher income indicates higher skills. Scientific researchers, employees working in scientific education and doctors in training are excluded from that rule, but for everyone else the threshold as of 2018 is €37,296 - or more. It seems simple, but since it relates to the taxable salary after the 30% ruling has been applied, it does take a careful and correct application.
Mistakes are easily made (also by employers) and can leave a well-meaning expat with an immediate 30% ruling decision withdrawal and a tax debt when the tax authorities do their math. Therefore, consulting a specialised expat tax or payroll agency can be a wise choice. A payroll company like Payingit International, for example, can take care of the entire application for you, ensuring everything is done correctly and on time.
Besides the tax reduction - which is substantial considering income tax can be as high as 52% in the Netherlands - there are also other benefits associated with the 30% ruling. For instance, you can change your foreign driving licence to a Dutch driving licence without redoing the test.
You can also set your taxpayer status as “partial non-residency”, which could result in a further tax benefit.