There are a few certainties in life, one of them being that we all have to pay taxes. Also employees recruited from abroad to work in the Netherlands (expats) have to pay Dutch income tax.
benefit of a specific tax exemption when they work and live in The Netherlands
and fulfill certain requirements. Since expats have to make extraterritorial
costs to settle in the Netherlands, the Dutch tax authorities decided to partially
compensate this under the so-called 30% ruling.
Only employees, who meet certain conditions can qualify for this 30%-ruling. When an expat qualifies for the 30%-ruling, it means that up to 30% of the salary is exempt from income tax. This tax-free fraction of the salary is the compensation for the extraterritorial costs. So if the salary is € 70.000 and the 30%-ruling is applied, then € 21.000 is exempt from tax.
Alternative to the application of the 30%-ruling, it is also possible for employer to reimburse the extraterritorial costs which the employee has to make tax-free.
Until 1 January 2019, the maximum duration over which the 30%-ruling could be applied was 8 years. Since 1 January 2019, this has been shortened to 5 years. Expats who already apply the ruling and have an ending date of 2024 or later are most affected by this shortened period. Their expiry date of the 30%-ruling will be preponed by 3 years without any transitional arrangement for this group.
There are several conditions which the expat must meet to opt for the 30%-ruling:
- The employee is recruited or hired from abroad to work in The Netherlands
- The employee is employed by a company which pays payroll tax in The Netherlands
- The employee’s work expertise is scarce in The Netherlands (additional conditions can apply)
- The minimum salary is € 38.347 (2020, reimbursement in not included)
- Employees younger than 30 years, their minimum salary is € 29.149 (2020, reimbursement is not included)
- 2 years before the first working day in The Netherlands, the employee lived for more than 16 months abroad, thus more than 150 km from the Dutch boarder.
- The employee received a decision (beschikking) from the Dutch tax authorities if the ruling is applicable. Employees receive this after the request is filled in and signed by employer and employee.
Be aware, there are exemptions and specific situations which are more complex than just the standard conditions summed above.
Also PhD students and students who are finishing their Master’s degree in The Netherlands can apply for this 30%-ruling. If employed within one year after finishing their study, they are exempt from the condition of being recruited or hired from abroad but must qualify for the 150km condition before their studies started.
Scientific researchers working in a specific institution and medical specialists who are in training are exempt from the salary-norm.
Conclusion Expats can profit from this Dutch 30%-ruling, but must qualify to complex conditions because every case is different. The duration of the 30%-ruling is drastically shortened in 2019, from 8 years to 5 years. So especially now is the time to think about the consequences of the ending of this ruling for expats and possibly discuss these consequences and alternatives with their employer and tax advisor.
If there are any questions regarding the 30%-ruling or other fiscal questions, please do not hesitate to contact Taxtics, e-mail to firstname.lastname@example.org or just call 06 83314275.