Ian Eisenberg – Team Lead Software Development
“After discussing my situation with Dennis and explaining what I wanted, he recommended a completely different course of action that I wasn’t even aware of. This turned out to be far simpler and much more profitable for me.”
The 30 percent ruling (30% ruling)
The 30% ruling is a Dutch tax ruling that may be applied by employers in the payroll for eligible employees. Employers can agree to split the gross wage in a 70% taxable part and the 30% tax-free part, intended to cover so-called extraterritorial expenses (or: ET expenses).
These ET expenses are additional expenses employees from abroad have due to the fact they live abroad. For instance, they may need language or cultural training, fly back home every now and then, require tax assistance and may need to be compensated for higher cost of living. With the ruling, these expenses may be fixes at 30% of the agreed salary and reimbursed tax-free without keeping receipt.
Benefits of the 30% ruling
Besides being administratively efficient, there is of course a big tax benefit. The Dutch marginal tax rate may be reduced from 52% to 36,4%. That’s more like it! Especially the higher incomes may benefit from this, as the 30% reimbursement is not (yet) capped.
In addition, employer may reimburse international schooling costs for employees tax-free. If the employer does not want to reimburse this, a cafetaria scheme may be opportune so that the employee can still enjoy the tax benefit!
Finally, taxpayers with the 30% ruling may opt to be treated as partial non-resident taxpayers of the Netherlands. This way, they are not taxable in the Netherlands on their assets such as bank accounts and private investments.
To be eligible, a number of conditions should be met and an official application form should be filed (with a deadline!). The criteria may seem relatively clear, but there is a lot of policy and case law and still some grey areas. In general it is recommendable to consult us before hiring a new foreign employee. One tip: make sure the employment agreement is signed before the employee comes to the Netherlands.
In practice, there are a number of situations where we have been able to obtain the 30% ruling, even if the employer or other tax consultants thought it was a lost game. So even if the employee is already in the Netherlands, it may be opportune to give us a call!
He walked me through every step of the process and I’m very happy with the outcome. – Ian Eisenberg
Of course evaluation of eligibility and filing applications for the 30% ruling are part of our business. In addition, we have great experience with the administrative implementation of the 30% ruling. Think of implementation in the payroll administration, work related cost scheme and provision of extraterritorial expenses in addition to the tax-free reimbursement. Or application on special benefits such as equity compensation and termination payments. Or developing policy around the 30% ruling and implementing cafeteria models around it, providing flexibility to employees whilst limiting additional costs for the employer.
As you can see, the 30 percent ruling has no secrets for us!