The 30% ruling (30%-regeling) explained
The 30% ruling (30%-regeling) is a Dutch tax facility available to employees who are recruited from abroad to work in the Netherlands and who possess specific expertise that is scarce on the Dutch labour market. Under the ruling, the employer can pay up to 30% of the employee's taxable salary as a tax-free reimbursement for extraterritorial costs (extraterritoriale kosten) - costs such as double housing, school fees for children, and travel to and from the country of origin. The ruling is governed by Article 10ea of the Wages and Salaries Tax Implementation Decree (Uitvoeringsbesluit loonbelasting 1965).
To qualify for the 30% ruling, several conditions must be met. The employee must have been recruited from a country other than the Netherlands and must have lived more than 150 kilometres from the Dutch border in the 24 months before commencing employment. The employee must also earn above a specified gross salary threshold, which is adjusted annually. The ruling is granted for a maximum of five years (following reforms in recent years that reduced the duration from eight years).
Application procedure in the Netherlands
The employer and employee jointly apply to the Dutch Tax and Customs Administration (Belastingdienst) for the ruling. The application must be submitted within four months of the start of employment; if submitted later, the ruling applies only from the first day of the month in which the application was made. Once granted, the ruling decision (beschikking) is issued and the employer can apply the 30% exemption through payroll. The ruling is linked to the specific employer - if the employee changes employers, a new application must be submitted.
Interaction with employment contracts and dismissal
The 30% ruling has important implications for expat employment contracts and for settlement agreements. Severance payments made under a settlement agreement may affect the tax basis on which the ruling operates. When calculating the transition payment, the ruling must be taken into account in determining the gross reference salary. Expats who are facing dismissal should seek advice from an employment lawyer with experience in both employment and tax law to ensure the financial consequences are correctly assessed.
The 30% ruling was available for a maximum of eight years until 2019, when the legislator reduced the maximum duration to five years. The Dutch tax authorities (Belastingdienst) further stimulate the arrival of expat knowledge workers: the salary threshold for qualifying knowledge migrants is EUR 52,000 gross per year (or EUR 38,000 for those under 30), aligning the ruling with the highly skilled migrant salary thresholds used by the IND.