What is the 30% ruling?

The 30% reimbursement ruling (better known as the 30% ruling) is a tax advantage for highly skilled migrants that are moving to the Netherlands for a specific employment role. Under certain conditions, the employer can grant a tax-free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax. The 30% ruling is equivalent to a maximum (effective) tax rate of approximately 36.4%. The resulting tax-free allowance is considered compensation for expenses that a foreign employee experiences when working outside their home country.

Comparison with other countries

The report (in Dutch) compares the 30% ruling in the Netherlands with similar arrangements in nine nearby countries (of nearby countries, all bar Germany have a comparable ruling). According to the report, the Dutch ruling is broader than average in both scope and target group. At eight years, the term for which the ruling can run for one employee is also longer than the more usual five years.

Use of the ruling

The evaluation also looks into the use of the ruling. An estimate of 5% of employers uses the 30% ruling. Of these, 1% – so 0.05% of all employers in the country, which is 171 companies – have hired no less than 43% of all employees making use of the ruling.

Successful measure

According to the report, the 30% ruling is functioning largely to its intended effect: it minimises administrative costs and helps attract foreign employees with specific skillsets that are scarce in the Netherlands. At the same time, it does not lead to disadvantages for Dutch employees due to some of the criteria for taking advantage of the ruling. In addition, the ruling keeps the business climate attractive for large, internationally oriented employers and results in spillovers of expertise, innovation and international networks. The report concludes that the ruling’s returns are greater than its costs.

However, there is room for improvement: according to the evaluators, some aspects could be modified to make the 30% ruling more efficient. Proposed changes include lowering the term from eight to five or six years and decreasing the tax-free allowance for incomes above €100,000.