30% tax ruling
Highly skilled migrants recruited from abroad may be eligible for the Netherlands’ 30% tax ruling. Find out more about the requirements for the 30% ruling and if you are eligible.
What is the 30% ruling?
The 30% reimbursement ruling (also known as the 30% facility) is a tax advantage for highly skilled migrants moving to the Netherlands for a specific employment role. When the necessary conditions are met, the employer can grant a tax-free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax. This reimbursement is intended as compensation for the extra costs that international employees can incur when moving to a new country for their work.
What are the financial benefits of the 30% ruling?
From a tax perspective, the salary agreed upon between you and your employer will be reduced by 30%. In return, you receive a 30% allowance as reimbursement for expenses. This is the most common way it is applied as it does not influence the salary burden for the employer. However, the employer is not obliged to pass on the financial benefit of the ruling to the employee. In practice, the employer can partially or fully take the benefit themselves. You and your employer must agree in writing that the ruling is applicable.
Am I eligible for the 30% ruling?
- You must be an employee - To be eligible for the 30% ruling, you have to be in an employment situation. If you are self-employed, it is not possible to claim the 30% ruling. However, if you set up a legal entity, a Dutch B.V. for instance, and become an employee of that company, you are considered to be in an employment situation and consequently may be eligible for the 30% ruling.
- You and your employer must agree in writing that the 30% ruling is applicable - The application for the 30% ruling must be agreed on by both employer and employee. If the 30% ruling is fully applicable, your gross salary will be reduced by 30%. This may have implications for your potential unemployment or disability benefits since these benefits are based on your taxable salary. Therefore the tax authorities require that both employer and employee are aware of these consequences. This agreement in writing can be done by means of a clause in your employment contract or as an addendum to your employment contract.
- You must transfer or be recruited from abroad - It is only possible to claim the 30% ruling if you are transferred or recruited from abroad. You must prove that you were residing outside the Netherlands before you began your present employment in the Netherlands. In addition, you must have lived a distance of more than 150 km from the Dutch border for more than 16 months out of the 24 months prior to your first working day in the Netherlands.
- You must have specific experience or expertise that is not or is rarely available in the Netherlands - These skills are determined by several factors such as salary, age, employment history, education and level of employment. None of these are conclusive but the combination of all aspects determines your specific skills. At present, the specific skills are assumed to be present if the minimum salary requirement is met (see below).
- Your gross salary has to surpass a minimum (adjusted annually) - In 2022, the annual taxable salary for an employee cannot be less than €39,467 (in 2021 it was €38,961). However, a minimum salary of €30,001 is applicable for those who have completed a master's degree and are younger than 30 years old (in 2021 it was €29,616). This means that, when the 30% tax ruling is taken into account, your salary cannot become less than these amounts. Salary thresholds are updated on 1 January every year.
- Exceptions to the minimum salary - No minimum salary is required for scientific researchers, employees working in scientific education or doctors in training. Please note that there are restrictions regarding the companies or institutions for which this group of employees can work.
How does the 30% ruling work in practice?
Here are two examples of how the 30% ruling works in practice:
- You are 35 years old and earning a salary of €100,000. After taking into account the 30% ruling your taxable salary will be €70,000. This meets the minimum salary requirement to receive the full 30% ruling so you will receive a tax-free allowance of €30,000.
- You are 35 years old and earning a salary of €50,000. If the 30% ruling was taken into account in full, your taxable salary would be €35,000. This is lower than the minimum salary requirement and therefore not allowed. In this case, you can only benefit from the 30% ruling partially, for a maximum amount of (€50,000 -/- €39,647) €10,353.
What is considered salary?
Your ‘regular employment income’ is the basis for calculating the 30% tax-free reimbursement. There are special regulations regarding pension premiums, but your bonus, holiday allowance, benefits package and company car fall under the ruling. Severance payments do not fall under the 30% ruling definition of ‘regular employment income’ and therefore do not qualify for the 30% tax-free option. If you are made redundant, it is important that you have a breakdown of the redundancy package so it can be determined which amount is your bonus and outstanding holiday allowance and which amount is the actual severance payment.
Are there other benefits of the 30% tax ruling?
In addition to the fact that 30% of your salary will be paid tax-free, there are also other benefits:
- The 30% ruling and Box 3 of your tax return: Under the 30% ruling, you can opt for the ‘partial non-residency status’. You are then considered to be a non-resident taxpayer in Box 2 and Box 3, even though you are living in the Netherlands. For Box 1 income you are considered a resident taxpayer, therefore you do not pay income tax on assets in Boxes 2 and 3 (except for real estate located in the Netherlands and substantial shareholding in a Dutch resident BV) and you are entitled to the partnership ruling in Box 1.
- Driving Licence: If you have a foreign driving licence, in most cases you will have to retake the driving test in order to obtain a Dutch licence. However, if you benefit from the 30% ruling, you can switch your foreign driving licence without retaking the test.
How long does the 30% ruling apply?
The maximum duration of the ruling is 5 years for applications that were approved after 1 January 2019. Applications approved between 1 January 2012 and 1 January 2019 had a maximum duration of 8 years, but new legislation may affect the end date.
Is there a retrospective period?
The 30% ruling becomes effective retroactively if the application is submitted within 4 months after starting your employment. If your application is submitted after 4 months, it will become effective as of the first day of the month following the month of application. The tax authorities will reduce the total duration of the ruling by the period you have already resided in the Netherlands.
What if I change jobs?
If you change jobs you can apply for a continuation of the ruling if you still meet the conditions regarding specific skills and you start the new job within three months of terminating the previous one.
How do I apply for the 30% ruling?
Typically, the employer is responsible for applying for the 30% ruling on your behalf. This can be done directly with the Dutch Tax Office (Belastingdienst). The tax office will respond to your application within 10 weeks. IN Amsterdam also handles applications for the 30% ruling from companies that are registered sponsors within the IND’s highly skilled migrant scheme.
Can I apply or reapply if I start my own business?
If you are employed in the Netherlands and have qualified for the 30% ruling, it is also possible to start your own business and keep the benefits of this scheme. To do so, the construction of the new business should be a BV or payroll company, of which you become a salaried employee. The BV or payroll company must then apply for the 30% ruling on your behalf. Keep in mind that you must sign an employment contract with the BV or payroll company within three months of leaving your previous employer in order to maintain your eligibility for the 30% ruling.