As an expat, one incurs significant costs, especially upon relocation. Depending on the situation, an expat may have to pay for visa, residence permit application, driving licences, Dutch courses, housing and bills.
The 30% ruling is created to mitigate the negative effects of these expenses on one’s income.
Conditional on eligibility, the 30% rule means that the tax base of your gross salary as an expat in the Netherlands may be reduced by 30%.
How does the 30% rule work
The Netherlands taxation department (“Belastingdienst”) coordinates and supervises the application of this rule.
You can calculate how much you will gain from using the 30% ruling yourself – just multiply your gross yearly salary by 30% – this will be the amount not taxed. 70% will still be taxed, using the legally applicable rates.
Take into account while calculating your gross yearly income, that this rule also applies to allowances for holidays, benefits and bonuses. A car, provided by your company, is also counted into your salary. Severance pay and pension-related premiums, however, are NOT counted.
A maximum tax (effective) rate of 36.4% is applicable to the rule. This is significantly lower than regular taxation brackets in the Netherlands (highest being 52 percent).
How long can you benefit from this rule as an expat
The maximum length of application of this rule for one person is 8 years. However, this length can be reduced, in case the expat has worked in Holland before. For those employees, who have been using the rule before 2012, the maximum length of application used to be ten years. Read more on the latest developments concerning the 30% reimbursement ruling and its duration.
Additional advantages and benefits
There are other advantages to using this rule, namely:
One can select the “non-resident” option in their tax declaration (Boxes 2 and 3 of the income tax declaration). If this status is used, assets listed in Box 2 and Box 3 are not taxable. The only exception are investments in real estate.
An expat, as well as the members of his/her family, can receive a driving licence, issued in the Netherlands, in place of their old one, without going to a driving test. Normally, a driving test would be required for this.
If an employer agrees to fund international school attendance, the reimbursement will be free of taxation.
Note that if these options are used, the other deductions are still applicable.
Expats working in the Netherlands as entrepreneurs can also apply for this benefit if they are employed through their own limited liability business (BV).
It is also a way for an entrepreneur to attract valuable foreign specialists.
To apply for the 30% rule you have to meet the following conditions that characterise you as a skilled worker:
- The expat must be employed by a Netherlands-based company.
- The expat must have professional knowledge and experience that is not easily found in Holland. An employee is considered to have this type of experience when their salary meets certain requirements.
- The employee and employer agree, that the rule is applicable (agreement must be in written form)
- The employee has been transferred/recruited from another country.
- Before commencing work in the Netherlands, the employee has resided outside of a 150km distance from the Netherlands more than two years.
Do not hesitate to contact our advisory team if you have questions regarding this rule.
The application process
To begin the process, an expat employee and his/her employer should submit the “Application for implementation of the 30% ruling” (“Verzoek loonheffingen 30% regeling”) to the Netherlands taxation department.
It’s possible that you just found out that you’re eligible. You can still apply. Depending on the time of application, you may also be eligible for retroactive reimbursement.
For example, if you file the respective documents within 4 months from starting work, you will be reimbursed retroactively for the first months. In case of submitting the documents later than 4 months from beginning your job, you need to wait for the approval of your application. The reimbursement period will begin on day one of the first month following this approval.
You can apply even years after you began work – the only condition is that you were eligible at the time you began working in Holland.
What happens if you change jobs?
In the event of termination of employment, where this rule has been applied, one can re-apply for continuing the application of the rule. For this, the new job must meet the requirements, set above. Additionally, in this case, the application must be filed no later than 3 months after the end of the previous employment.
Read our FAQ for more information on the 30 percent tax ruling.