What is the 30% ruling? And do I qualify for it?

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.