Netherlands 30% ruling

Dutch tax 30% ruling, formerly known as ruling 35%, is a benefit for foreign knowledge workers residing in the Netherlands and earn their salary here. In a nutshell, this is a tax free allowance enabling these employees to reduce their income tax payments. The following text is extracted from the Dutch tax publications, however it is brought up here as general reference only and no one should rely on it as a substance to the law itself.

Tax-free allowance for extraterritorial employees: 30% ruling facility

If your employee incurs expenses in the performance of his employment, you may reimburse him for particular costs free of tax.

Employees who are seconded to another country or come to work in the Netherlands from another country are known as extraterritorial employees. If these employees meet certain conditions, they are eligible for a special expense allowance scheme: the 30% facility.

Under this facility, you may provide 30% of the wages as an allowance including compensation for the additional costs of your employee’s temporary stay in another country or, if you are recruiting an employee from abroad, of his temporary stay in the Netherlands. This allowance is tax-free.

This involves 30% of the wages from present employment, including the allowance itself. This allowance is tax-free.

 

Example of ruling 30%

The allowance is calculated as follows:

The wages excluding the allowance amount to € 40,000. The maximum tax-free allowance for extraterritorial expenses will then be 30/70 x € 40,000 = € 17,143.

 

Term of ruling 30%

The 30% facility for employees from abroad has a maximum term of ten years. The term starts on the first working day. This term may be reduced. This happens in the following cases:

•The employee already worked or stayed in the Netherlands before taking up employment.

•The request to be considered for the 30% facility is not submitted within 4 months.

•After 5 years it emerges that the specific expertise is no longer scarce on the Dutch labour market.

Employee already worked or stayed in the Netherlands

An employee who comes from abroad but already stayed or worked in the Netherlands at an earlier stage, will have his term reduced by the period in which he stayed in the Netherlands.

 

Exception

If an employee lives in the Netherlands, subsequently moves abroad and then returns to the Netherlands, the term of the facility will be reduced by the period or periods in which he stayed in the Netherlands before moving abroad. In practice, this means that the tax-free allowance can almost never be applied in case of remigration: the period or periods of residence in the Netherlands (from birth to emigration) will be too long. To prevent this, the period in the Netherlands is disregarded in certain situations. This will be the case if:

 

•the period ended more than 15 years ago, counting from the start of the employee’s employment

•the period ended more than ten years ago and less than 15 years ago, counting from the start of the employee’s employment. The employee should only have worked or stayed in the Netherlands for short periods of time. This will be the case if:

•an employee worked in the Netherlands for no more than 20 days per calendar year

•the total stay in the Netherlands did not exceed six weeks per calendar year and took place in the context of a family visit, holiday or other personal circumstances

•the stay was a once-only occurrence, covering a maximum period of three consecutive months, and took place in the context of a family visit, holiday or other personal circumstances

These periods are deducted from the term, however.

 

Request not submitted within 4 months

The joint request for application of the facility should be filed within 4 months after the start of the incoming employee’s employment. If the request is made after this period, the term will be reduced.

 

Employee’s expertise is no longer scarce

After five years, the Tax and Customs Administration may ask the employer to demonstrate that his employee still fulfils the requirement of specific expertise. It is possible that the employee’s expertise is no longer as scarce on the Dutch labor market as when he was hired or seconded from abroad.

 

You as the employer can judge for yourself whether the incoming employee’s expertise is still scarce on the Dutch labor market, or have this assessed by the Tax and Customs Administration. To this end, you can submit a request to the Tax and Customs Administration/Limburg/Department of International Affairs.

If it appears that the employee no longer fulfils the condition of scarce, specific expertise, the facility will end with effect from the 61st month. If the employee still meets the conditions, the facility will apply until the end of the term (with a maximum of ten years).

 

Requesting ruling 30%

In order to apply the 30% facility for incoming employees, you must have the permission of the Tax and Customs Administration. To this end, you have to submit a joint request (employer and employee) to the Tax and Customs Administration at the following address:

 

Belastingdienst/Limburg/kantoor Buitenland

Postbus 4486

6401 CZ Heerlen

The Tax and Customs Administration will decide on the request by a ruling open to objection. This means that you can file an objection to the decision.

 

Application form

You can order or download the form for submitting a request for the application of the 30% facility for employees seconded to the Netherlands from the Tax Information Line for International Issues.

You do not need the permission of the Tax and Customs Administration to apply the 30% facility to employees seconded abroad.

 

When will the facility commence?

If the request has been made within four months of the start of the employee’s employment, the facility may be applied from the first day of employment. If the request was made later, the facility will be applied from the first day of the month following that in which the request was made. The commencement date of the facility will be specified in the ruling from the Tax and Customs Administration.

 

Content of the facility

If your employee is eligible for the 30% facility, you may pay him a maximum of 30% of the wages as a tax-free allowance for extraterritorial expenses, without the need to submit further evidence. This involves 30% of the wages from present employment including the allowance, which means 30/70 of the wages for payroll tax purposes.

 

Example

The wages excluding the allowance amount to € 40,000. The tax-free allowance for extraterritorial expenses will then be 30/70 x € 40,000 = € 17,143.

This is subject to the condition that the employee is not entitled to double tax relief in respect of those taxable wages. In other words, these wages must be fully taxable in the Netherlands.

 

Paying the allowance in addition to the wages

The tax-free allowance should be paid separately from the wages. To this end, the agreed wages may be reduced in accordance with employment law. An administrative division of the wages into a wage component and a tax-free allowance component for extraterritorial expenses is not permitted.

 

Extraterritorial expenses

You can pay the tax-free allowance to cover extraterritorial expenses. If the 30% facility applies, you are not required to retain documentary evidence. If you use the 30% facility, you are not allowed to pay the actual extraterritorial expenses tax-free as well.

 

If the total extraterritorial expenses exceed the allowance paid under the 30% facility, there is a possibility to reimburse the actual expenses. In that case, however, you will have to provide evidence for these extraterritorial expenses. If you can demonstrate that the expenses exceed 30%, the expenses actually incurred can be reimbursed free of tax. In this connection, there is no time restriction for the reimbursement of double housing costs.

 

The following costs qualify as extraterritorial expenses:

 

•additional costs of living because prices in the country of work are higher than those in the country of origin. Examples include the additional costs of meals, gas, water and electricity

•costs of a familiarization trip to the new country of work, whether or not with the family, for instance in order to find housing or a school

•costs of applying for or converting official personal documents, such as residence permits, visas and driving licenses

•costs of medical examinations and vaccinations required for the stay in the new country of work

•double housing costs if the employee continues to live in the country of origin. These could be hotel expenses, for example

•additional (initial) housing costs

•storage costs for the household effects that are not moved to the new country of work

•costs of travelling to the country of origin, for instance for family visits or family reunification

•additional costs for the completion of a tax return, if this is more expensive than having the tax return completed by a comparable tax consultant in the country of origin

•costs of a training course in order to learn the language of the new country of work, both for the employee and for the family members residing with him

•additional (non-business) call charges for telephone calls to the country of origin

No extraterritorial expenses

The following items do not qualify as extraterritorial expenses and are therefore cannot be reimbursed free of tax:

 

•secondment allowances, bonuses and comparable allowances (foreign service premium, expat allowance, overseas allowance)

•capital losses

•purchase and selling costs of a property (reimbursement of house purchase costs, broker’s fee)

•compensation for higher tax rates in the country of work (tax equalization)

Tax-free reimbursements in addition to the 30% facility

In addition to the 30% facility, the school fees for an international school or for the international department of an ordinary school can be reimbursed free of tax.

 

This is permitted if:

 

•the curriculum at the school (department) is based on a foreign system

•the school (department) is in principle only open to children of seconded employees

The following costs, amongst others, may also be reimbursed free of tax:

 

•removal costs and the costs of the temporary storage and transfer of the household effects

•costs of a familiarization visit by the employee to the business in the country of work

•costs of the application for or conversion of a work permit or a highly skilled migrant permit

•commuting expenses (expenses for (regular) commuting)

•telephone line rental costs

•costs of business meals

Please note:

 

The 30% facility also applies to the employee insurance contributions. If your employee is insured in the Netherlands under the employee insurance schemes, you are not required to deduct employee insurance contributions from the amount of the 30% tax-free allowance.

For more information on the 30% facility and extraterritorial expenses, read the handbook (in Dutch) on payroll taxes, the Handboek Loonheffingen.

 

Disclaimer: the above text is extracted from the Dutch tax authorities and is brought here only as general reference. In any case, one need to consult the tax authorities or a certified accountant for the actual process.