30% ruling the Netherlands. What's it all about?

The Dutch 30% ruling offers one of a kind tax benefits for expats living and working in the Netherlands. However, requirements and applications should not be taken lightly. Negative consequences can catch up retroactively.

30% ruling, let's talk money

You can receive up to 30% of your salary as a tax-free reimbursement. Hence 30% ruling. To prevent the Dutch Treasury from being left empty-handed there are minimum salary requirements to be met. For 2021 € 38.961,00 (€ 29.616 if you have a master's degree). If you earn 100K per year you benefit from the full 30%. 70K is taxed and meets the requirements. 30K is tax free. If you make 45K however a 30% discount will leave you at € 30.000,00 below the minimum requirements. In this case € 45.000,00 minus € 38.961,00 = € 6039,00 can be reimbursed tax free. With a master's degree, you escape by the skin of your teeth.

Salary under the 30% ruling doesn't differ much from what is considered salary elsewhere. Your regular employment income, bonuses, benefits packages, company car, and holiday allowance all fall under the 30% ruling Netherlands. Severance payments are an exception.

30% ruling and your income tax return

The Dutch income tax system operates with 3 boxes. If you are granted the 30% ruling you can choose to be regarded as a non-resident tax payer for the second and third box. The second box is the taxation of substantial shareholding (>5%), the third box consists of other assets like bank accounts, claims, stocks, etc.
Opting for this choice in your income tax return (M-form) will exempt you from paying income tax for boxes 2 and 3 and can lead to considerable tax benefits.

Do you meet the requirements?

First of all, you have to be an employee. If you are self-employed, for example, Z.Z.P., the 30% ruling doesn't apply to you. In some cases, it is possible to be in the employment of your own B.V. (The Dutch version of an LTD or LLC). You possess specific skills that are scarce on the Dutch labor market. This decision-making process is a bit of a black box. Criteria as education, salary, history of employment market niche come into play. If you currently meet the salary requirements however you will get a pass

You resided outside of the Netherlands before starting your employment and live at least 150 km fof the Dutch border. Then there are the salary requirements I spoke of earlier.

Read carefully if you are contemplating applying for the 30% ruling

At the moment the duration of the 30% ruling is 5 years. If the application is done within 4 months after starting your employment you will be granted the 30% ruling from day one. If submitted later the 30% ruling will start the next month. Hick-ups in the application can cause you to lose valuable time and money. Changing employers within a timespan of 3 months will not lose you your rights if all other circumstances remain the same.

Understand that the 30% ruling is an agreement between you and your employer and needs to be part of your employment contract. Reducing your gross salary will result in lower unemployment or, god forbid, disability benefits. Therefore the Dutch Tax Authorities want this in writing in your employment contract. Retro-active denial of the 30% ruling is a very real possibility if the wording of the contract and or application is not correct.

You've been granted the 30% ruling too late now what?

Regrettably, I frequently come across cases where the 30% ruling was granted too late. The Dutch tax authorities can take notoriously long while making a decision. Sometimes expats even already left the Netherlands. This has mainly to do with the tax authorities but is also the responsibility of the employer or other intermediary who assisted in the application. And last but not least that of yourself.

A recent Dutch court-ruling has clearly stated that retroactively applying the 30% ruling in your income tax return is not the way to go. There is logic to this; the 30% ruling is wage tax-related, not income tax. Corrections should be done through separate wage tax filings via the employer. Not all employers are willing to do that. Maybe you've worked for a payroll company. Circumstances can be complicated and it's not always clear who can be held accountable. Definitely not easy finding your way out of such a mess from the other side of the world. All communication in Dutch of course.

Does this sound familiar to you? In that case, you are more than welcome to present your case to me.

Do you need assistance with the 30% ruling?

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Stephan Jongedijk
Register Tax Advisor