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What is the 30% Tax Ruling in The Netherlands?Published on 23 August 2022
The Netherlands has developed some specific rules and regulations around income tax for expats. Reason for this is to promote The Netherlands as a potential expat destination for high-skilled foreign professional. Broadly speaking, this ruling means that 30% of the income of the expat will not be taxed. But this ruling comes with many requirements and snags. In this article, we provide you with the most important information about the 30% tax ruling.
What is the 30% tax ruling?
The 30% tax ruling (or 30% facility as the Dutch ‘Belastingdienst’ calls it) is designed to make The Netherlands more attractive as an expat destination. The idea is to accommodate the expats in their needs and extra costs they will make for their relocation. That varies from higher costs of living (of The Netherlands is more expensive for living than the home country) to search a new house, apply for the right permits and paperwork, and many more.
How does it work exactly?
30% of the income is tax-free and can be used for extraterritorial costs. Practically, the employer will reduce the salary of the foreign employee to 70%. This part of the income is taxed according to the regular Dutch income law regulations. The remaining 30% is added to the monthly payment under the name of this special ruling and is tax-free.
Extraterritorial costs are for example:
- Higher costs for living
- Costs for familiarization trips to The Netherlands prior to the move
- Fees for paperwork and converting personal paper such as vias and drivers licenses
- Costs of medical examinations and vaccinations
- Double housing costs
- Storage costs for the estate that is not moving with the expat
- Travel costs to visit family or friends
- Language training costs
- Costs of calls to the home country
Who can qualify for the 30% facility?
The 30% facility is designed for expats, but only few will meet all the terms and conditions to succeed:
- The expat is in paid employment by a Dutch company under Dutch payroll tax rules
- The expat is high-skilled or has specific expertise that is rare in Dutch larbor market
- The expat is recruited from abroad
- The expat has ot lived for more than 16 months out of the previous 24 months within 150 km from the Dutch border
- This means that employees from Belgium, Luxembourg, a large part of Germany and the north of France are not eliglbe
- The expat earns at least 39.647 (2022) euro or 30.001 euro when under 30 years old and have a masters’ degree of PhD
To illustrate the salary requirements, we give two examples:
- An employee earns 100.000 euro. After taking into account the 30% ruling, the taxable salary will be 70.000 euro. This is more than the minimum requirement so the expat will receive a tax-free allowance of 30.000 euro
- An employee earns 50.000 euro. After taking into account the 30% ruling, the taxable salary will be 35.000 euro. This is lower than the minimum requirement so the employee can only partially benefit from the 30% ruling (50.000 – 39.647 = 10.353 tax-free allowance)
For how long does the 30% rule apply to the expat?
In the past, the 30% facility applied for 8 years. But discussions about the rule lead to regular changes of the terms and conditions. Since 2019, the 30% facility is now available for expats for a maximum of five years. Moreover, the Dutch government recently (2022) decided that employees with a very high income (>216.000 euro) cannot profit of the tax-free allowance anymore.
Other advantages of the 30% tax ruling
People under the 30% tax ruling can also enjoy other advantages. One of them is that there is no need for them to convert their driving license. Normally, foreigners have to take new driving lessons and tests is order to receive a Dutch license. Expats under the 30% tax ruling can use their own driver’s license or convert it without any requirements.
Do you need help or advice?
Are you an international company that is planning to relocate employees to The Netherlands? Or are you an expat in The Netherlands and, for example, changing jobs? Eurohome, a brand of Voerman Group, can assist you with the (re)approval of the 30% facility. Also discover our other relocation management services.