1. What is the 30% ruling?
This series addresses the most relevant topics regarding the 30 percent ruling. In this post: What is the 30% ruling?
The 30% ruling is a Dutch personal tax privilege for certain employees who have been posted or recruited from abroad to work in the Netherlands. There are a number of conditions to be fulfilled. Timing of concluding the employment agreement and arriving in the Netherlands is crucial. If you do it wrong, you may jeopardize eligibility.
Key benefit: lower tax rate
The most important benefit of the 30% ruling is that employers may grant to their employees a maximum tax-free allowance of 30% of the (original) agreed income from current employment without proof of (actual) costs. This may reduce the maximum Dutch tax rate on employment income from 51,75% to 36,23%.
The 30% allowance is meant as a fixed allowance for so-called extra-territorial costs (ET costs). ET costs are additional costs that may be incurred due to living abroad, such as double housing costs, higher cost of living (purchasing index) and home leave. Therefore, it is – with the exception of international school fees – not possible to reimburse ET costs tax free in addition to the 30% allowance. However, if the actual ET costs are higher than the 30% allowance, the actual higher ET costs can be reimbursed tax-free.
Application for the 30% ruling
In order to obtain the ruling, an application form must be filed by the employer and employee. The application form should be sent to the Dutch tax authorities. This should be done within 4 months of the employment start date. If it is filed later, the benefit can not be enjoyed from the first day of employment.
There is so much more to say about the 30% ruling. On this website you will find detailed information on the conditions of the 30% ruling, the various (tax) implications and all other benefits of the 30% ruling.