What is the 30% Tax Rule for Expats in the Netherlands?

The Netherlands is widely regarded as an attractive destination for international talent, thanks to its robust economy, high quality of life, and welcoming culture. One of the most appealing financial incentives for expats relocating to the Netherlands is the 30% tax ruling, a beneficial tax scheme designed to ease the financial burden associated with international relocation. This tax facility is one of several strategic Dutch tax benefits aimed at attracting skilled workers.

If you're navigating this as an employer or employee, Rivermate provides insights into compliant international hiring, relocation logistics, and global payroll solutions.

What is the 30% Tax Ruling in the Netherlands?

The 30% tax ruling is a special tax advantage for highly skilled international workers moving to the Netherlands. This ruling allows expats to receive 30 percent of their gross salary tax-free, significantly reducing their taxable income and making the Netherlands a highly attractive location for employment.

For those living in the Netherlands as expats, this ruling offers a significant financial incentive to offset the additional costs associated with international relocation, such as housing, schooling, and travel.

How does the 30% tax ruling work?

Under the 30% tax ruling, 30% of your salary is exempt from Dutch income tax, effectively decreasing your taxable salary to 70%. This tax-free portion covers extraterritorial expenses, such as relocation costs, housing, and international school fees. Employers handle this directly through payroll, providing simplicity and immediate financial benefit from the first paycheck.

Who qualifies for the 30% tax ruling?

To be eligible for the 30, you must be a highly skilled migrant recruited from abroad with specific expertise not readily available in the Netherlands. Additionally, you must meet the minimum salary threshold and have lived at least 150 kilometers from the Dutch border for 16 of the 24 months before starting work in the Netherlands.

What are the benefits of the 30% tax ruling?

The primary benefit of the 30 percent tax ruling is a tax advantage and substantial financial savings through reduced taxable income, significantly increasing your disposable income. It also covers various extraterritorial expenses, reducing the financial burden of moving internationally. Employers benefit by attracting skilled international employees more easily and managing payroll more efficiently. This arrangement can also simplify tax returns and enhance overall financial planning.

How to Apply for the 30% Tax Ruling?

Applying for the 30% tax ruling requires a joint application between you (the employee) and your employer. This application is submitted directly to the Dutch Tax and Customs Administration. You must submit a new application when changing employers.

What are the steps to apply for the 30% tax ruling?

To successfully apply, follow these clear steps:

1. Verify eligibility by reviewing official guidelines provided by the Dutch Tax and Customs Administration.
2. Prepare and gather all necessary documentation.
3. Complete and submit a new application form together with your employer to the Dutch Tax Office.

See detailed guidelines on the Dutch Tax and Customs Administration website.

What documents are needed for the application?

When applying, you must provide the following documents:

• Valid passport and Dutch residence permit.
• Signed employment contract clearly outlining salary and role.
• Proof of previous residence abroad (e.g., utility bills, rental agreements).
• Detailed job description emphasizing your specific expertise and skills.

Ensuring these documents are complete and accurate is crucial to obtain a Dutch tax ruling successfully.

How long does the application process take?

The processing period typically ranges between 2 to 4 months. However, this duration can vary depending on application completeness and workload at the Dutch Tax Office. It's advisable to apply as early as possible to ensure timely approval, especially if applying within the period of 2023, during which volume of applications was notably high.

Eligibility Criteria for the 30% Tax Ruling

The eligibility criteria for the 30% tax ruling include specific salary, skill, and geographical requirements. The ruling is applicable only if all conditions are met, including minimum salary thresholds, proof of expertise, and prior residence outside the Netherlands.

What is the minimum salary requirement for expats?

To qualify for the 30% ruling, expats must meet a minimum threshold based on age:

• For expats under 30 years of age, the minimum annual salary is €31,891 (excluding the tax-free allowance).
• For expats aged 30 years and older, the minimum annual salary requirement is €45,001 (excluding the tax-free allowance).

These amounts are reviewed and updated annually by the Dutch government.

Who is considered a highly skilled migrant?

A highly skilled migrant is defined as an individual possessing specialized knowledge or advanced qualifications not commonly available within the Netherlands. Typically, these are professionals in sectors such as technology, finance, engineering, healthcare, or scientific research.

What are the geographical requirements for eligibility?

To qualify, expats must have lived at least 150 kilometers away from the Dutch border for at least 16 months before commencing employment in the Netherlands. This requirement helps to ensure that the tax benefit supports genuine relocation cases

Tax Benefits of the 30% Ruling

The 30% tax ruling offers substantial financial advantages for both expats and employers:

How does the 30% tax ruling impact your income tax?

The 30% ruling significantly reduces your taxable income, meaning you only pay income tax on 70% of your gross salary. While there is no maximum salary cap for eligibility, only 30% of the agreed gross salary (up to the actual salary amount) qualifies for the tax-free benefit—ensuring a fair and proportional advantage for high earners.

What is the tax-free reimbursement under this ruling?

Under the 30% ruling, the tax-free allowance is designed to cover extraterritorial expenses such as housing costs, relocation fees, travel expenses, and international schooling for children, helping to mitigate the cost of relocating internationally.

How can employers benefit from the 30% tax ruling?

Employers benefit significantly from the 30% ruling by attracting and retaining top international talent. The ruling simplifies payroll administration and reduces employment costs, enhancing the company's competitive edge. Employers often partner with an Employer of Record (EOR) to streamline compliance and payroll management, making the hiring of international talent seamless and efficient.

Claiming the 30% Tax Ruling on Your Tax Return

Understanding how to correctly claim the tax benefit is crucial for expats to maximize its advantages.

How to claim the 30% tax ruling on your income tax return?

The 30% tax ruling is usually handled automatically by your employer through payroll. However, it's essential to verify your payslips regularly to ensure the ruling is correctly applied. You don't typically need to perform additional actions on your tax return unless the ruling hasn't been properly reflected in your salary statements. In such cases, you must include the details explicitly to claim the tax benefit in your annual tax return submission. For precise guidance, check the official instructions provided by the Dutch Tax and Customs Administration.

What are the common mistakes to avoid when claiming?

To ensure you avoid common pitfalls:

• Regularly confirm the correct application of the ruling in your payslip.
• Ensure joint application submission by both employer and employee.
• Double-check all provided documentation for accuracy and completeness.
• Stay aware of the salary thresholds, ensuring your earnings continuously meet the eligibility criteria.

For detailed information on common mistakes, refer to the Dutch Tax Authority’s guidelines.

What happens if you miss the deadline to claim?

If you miss the application deadline, you lose potential benefits for the period prior to the approval date. The ruling isn't retroactive, so delays can significantly impact your Dutch tax benefits. However, you can still apply for future benefits by submitting the application promptly thereafter. For specific advice on missed deadlines, contact the Dutch Tax and Customs Administration directly.

Duration and Renewal of the 30% Tax Ruling

Understanding the duration and potential renewal options of the 30% tax ruling is crucial for maintaining your financial benefits

How long does the 30% tax ruling last?

As of January 1, 2019, the 30% tax ruling lasts for a maximum duration of five years. Previously, this duration was eight years, but the Dutch government reduced the period to five years to align with international standards and fiscal policy. This change became particularly relevant during the period of 2023, as transitional rules expired.

Can the 30% ruling be renewed?

Generally, the 30% ruling cannot be renewed once the initial five-year period expires. After this period, expats must adjust to paying full income taxes without the benefit of the 30% allowance. However, significant employment changes, such as switching employers or a significant adjustment in your salary, might allow you to apply for a new ruling, provided you meet the conditions of the scheme.

What to do if your situation changes?

If your employment or personal circumstances significantly change during the ruling period such as losing your job, salary adjustments below the required threshold, or changing employers you must notify the Dutch Tax and Customs Administration immediately. Changes may affect your eligibility for the continued benefit of the 30% ruling. Prompt reporting helps avoid potential fines or penalties.

Conclusion

The 30% tax ruling is a valuable tax facility for highly skilled professionals available in the Netherlands, providing significant savings and simplifying relocation. Whether you're an employee or an employer, understanding the application, renewal, and compliance process is key to successfully leveraging this unique incentive.

Check out our Netherlands country guide for the in-depth overview of local tax schemes and employer obligations.

FAQs

Can I apply for the 30% tax ruling after I've already started working in the Netherlands?

Yes, you can apply after you have started working. However, to maximize benefits, it is advisable to submit the application within four months of beginning your employment.

Do I need to submit an annual application for the 30% ruling?

No, once approved, the ruling is automatically applied each year for the duration of the approval period. However, you should always check your payslip regularly to ensure it’s correctly applied.

What if I change jobs while in the Netherlands?

If you change employers, you and your new employer must submit a new joint application for the 30% ruling. To continue receiving the benefit, you must still meet the minimum eligibility requirements, including the salary threshold and being recruited from abroad.

Can my spouse or partner benefit directly from my 30% ruling?

No, your spouse or partner cannot directly benefit from your ruling unless they independently meet the eligibility criteria for their own 30% ruling. However, your increased disposable income indirectly benefits your entire household.

Is the 30% ruling applied retroactively?

The ruling is generally not applied retroactively. It starts from the approval date or the commencement date of employment in the Netherlands if applied within four months of starting your job.

Does the 30% ruling affect my Dutch pension contributions?

Yes, since pension contributions are typically calculated based on taxable salary, the reduced taxable salary due to the 30% ruling could lower your pension contributions. It is essential to discuss this impact with your employer and financial advisor.

Can I still qualify if my salary falls below the threshold during the ruling period?

If your salary falls below the required threshold, you may lose eligibility for the 30% tax ruling. You must notify the Dutch Tax and Customs Administration promptly to avoid any penalties or complications.

For further clarification or detailed advice, please consult the Dutch Tax and Customs Administration.

Check out Rivermate to discover employer and employee tax responsibilities in the Netherlands