The Netherlands: Introduction to the 30% Ruling By Kira

You may have heard of the 30% ruling; what exactly is the 30 percent ruling and how

does it work.

Netherlands is a hot spot for Expatriates. Expats working in the Netherlands are subject

to Dutch tax legislation. The 30% Ruling is a tax advantage for foreign employees,

expats, working in the Netherlands. The 30% Ruling is granted on a case-by-case


If a number of varying conditions are met (in 2012 conditions for eligibility have

changed), the employer is allowed to grant a tax free allowance amounting to 30%

times 100/70 of the gross salary subject to Dutch payroll tax. In other words, 30% of

gross income (including bonuses, company car taxes and typical Dutch income

components such as standard 8% holiday pay) is untaxed. The tax-free allowance is

considered a compensation for the expenses that a foreign employee has by working

outside his or her home country.

One of several conditions for eligibility is that the employee has to be hired from abroad

by a Dutch resident employer or a foreign employer who is a wage tax withholding

agent in the Netherlands. The main or key condition for eligibility is that the employee

must have skills or knowledge not readily available on the Dutch Labor Market.

Furthermore, the employee’s taxable salary is at least € 35,000 per annum. An

interesting fact regarding the 30% Ruling is that less strict rules apply for PHD and

Masters Graduates younger than 30 years old when it comes to the salary

requirements. In fact, Scientific Personnel have no salary norm.

In regards to duration, the 30% Ruling will be granted for a maximum of 8 years and will

be applicable as long as all of the conditions are met. However, any period spent in the

Netherlands over the last 25 years will be used to reduce the maximum duration of the

30% ruling.

Although the ruling sounds like a wonderful arrangement, it does have a consequence.

Lowering the taxable income will most likely have implications for one’s potential

unemployment or disability benefits, since these benefits are based on one’s taxable



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