Moving to a new country can be an exciting but complex experience, especially when it comes to understanding the local tax regulations. For expats living in the Netherlands, the 30% ruling is a significant tax advantage that can greatly impact their financial situation.

In this article, we will delve into the details of the 30% ruling, explain what it is, who is eligible, how it can benefit expats in the Netherlands and what the recent changes and regulations are.

What is the 30% ruling?

The 30% ruling is a tax advantage offered by the Dutch government to attract highly skilled migrants to work in the Netherlands. This ruling allows qualified expatriates to receive 30% of their gross salary tax-free, making it an attractive incentive for professionals considering a move to the country.

To qualify for the 30% ruling, individuals must meet specific criteria:

  1. The expat employee: The employee must be recruited or transferred from abroad to work for an employer in the Netherlands.
  2. Specific expertise or skills: The employee must possess specific expertise or skills that are scarce or unavailable in the Dutch labor market.
  3. Recruitment from abroad: The employee should have been recruited from a location outside a 150-kilometer radius from the Dutch border. In some cases, exceptions may apply.
  4. Employment relationship: The employer and employee must agree in writing that the 30% ruling is applicable to their employment relationship.
  5. Application deadline: The application for the 30% ruling should be submitted within four months of starting employment in the Netherlands.

The 30% ruling in and after 2024

Expatriates who temporarily work and reside in the Netherlands currently enjoy a tax exemption on 30% of their income. This expatriate scheme has been a boon for companies looking to attract foreign talent. However, significant changes are on the horizon. Starting from 2024, the 30% ruling will undergo these adjustments:

  • During the first 20 months, expats will benefit from the full 30% tax exemption.
  • In the subsequent 20 months, the tax-free allowance will be reduced to 20% of their income.
  • For the final 20 months, the exemption will apply to 10% of their income. After this period, expats will be subject to taxation on their entire income.

What if the 30% ruling is granted in December 2023 or earlier?

There is a transitional arrangement for employees who were already granted the 30% allowance in December 2023. They will not be affected by the reduction of the allowance. This applies to both existing employees with the 30% ruling and foreign employees whose employment in the Netherlands commences before December 31, 2023.

Things you need to know about the 30% ruling

  1. Tax-free allowance: The most significant benefit of the 30% ruling is the tax-free allowance, which amounts to 30% of the employee’s gross salary. This can result in a substantial increase in the net salary for expatriates.
  2. Simplified administration: The ruling simplifies the tax administration for both employers and employees. The 30% tax-free allowance is usually processed by the employer, reducing the burden on the expatriate employee.
  3. Duration of the ruling: The maximum period of receiving the 30% tax-free allowance is five years, starting from the year of arrival in the Netherlands.
  4. Optional partial application: If the expatriate has lived within a 150-kilometer radius from the Dutch border during at least 16 of the 24 months preceding their employment, they can opt for a partial application of the ruling.

Need more information? Consult with a professional

For expatriates considering or already working in the Netherlands, the 30% ruling is a valuable financial incentive that can significantly enhance their net income. However, it’s crucial to ensure eligibility and adhere to the application deadlines to fully leverage this tax advantage. As regulations may change over time, it’s advisable to consult with tax professionals or legal experts for the most up-to-date information and personalized guidance on the 30% ruling. Keep in mind the upcoming changes in the duration and structure of the 30% ruling to make informed decisions regarding your financial planning during your stay in the Netherlands.

More information about the 30% ruling can be found on the website of the Dutch Tax Administration. To apply for the 30% ruling you can use this application form.