July 19th, 2023
The 30% ruling is a tax exemption for skilled employees who come to the Netherlands to work from abroad, and meet certain criteria. The 30% ruling means employees may receive a tax-free allowance of 30% of their gross salary. The 30% ruling applies to any sector, but only to contracted employees. It is possible to start a B.V. (a Dutch company) and employ yourself to receive the 30% ruling. However this company needs to be established while the individual is living and registered abroad.
In simple terms, this means that only 70% of their salary will be subject to income tax for a period of up to five years, which may be shorter if the employee has previously lived in the Netherlands (the amount of time lived in the Netherlands will be deducted from the 30% ruling duration).
The criteria for eligibility are as follows.
- The employee must work for an employer that is registered in the Netherlands.
- The employer and employee must sign, in writing, that they wish to apply the 30% ruling.
- The employee was recruited while living and registered outside of the Netherlands.
- The employee earns more than EUR 41,954 per year (2023)
- The employee must have specific skills or expertise that are not widely available in the Netherlands.
Pay Attention: The 30% Ruling Salary Threshold Rules
The 30% ruling is a complex tax-exemption, as it only applies to certain expenses, and there are various restrictions depending on the circumstances. For example, for under 30’s with a Dutch Master’s Degree, the 30% ruling minimum salary threshold is lower, at EUR 31,891 in 2023. For doctors and researchers, there is no minimum salary threshold.
Pay particular attention to the salary threshold, as employees must still meet the minimum salary requirements after the 30% exemption is applied. Therefore, for an employee to benefit fully from the 30% ruling, they must earn around EUR 60,000 per year, as deducting 30% from EUR 60,000 leaves EUR 42,000, which is just above the 30% ruling 2023 salary threshold in the Netherlands.
Importantly, the 30% exemption will only be applied to income above EUR 41,954. For example, if someone earns EUR 50,000 and the 30% ruling exemption is applied, that leaves a taxable income of EUR 35,000. In such a case, the 30% ruling can only be applied to the amount left above EUR 41,954, so 30% of EUR 8,046. Employees ought to pay close attention to this to determine how to maximize the benefits of a 30% ruling.
If someone has a tax partner (married, for example) they can take advantage of further benefits, such as partial non-residency. This means people that are tax partners of someone in receipt of the 30% ruling may not need to declare their Box 2 or Box 3 income. People under the 30% ruling can also change their driving license to a Dutch one, as can their tax partner. However, be aware that in general the 30% ruling means someone is a full domestic tax payer, so they will need to declare their global assets and wealth in their Dutch tax return.
Tip: There is a maximum salary for the 30% ruling which will come into effect in January 2024. This maximum cap also goes up each year. It is currently EUR 230,000. Any earnings above this amount will be paid at the highest tax rate.