The 30% Ruling for Foreign Employees in the Netherlands

The 30% ruling is a significant tax benefit for foreign employees with specialized expertise working in the Netherlands. This ruling allows employers to provide a tax-free allowance equal to 30% of the employee’s gross salary, provided certain conditions are met. The ruling increases the employee’s net salary while simultaneously reducing the employer’s overall costs by minimizing taxable salary components.

Purpose of the 30% Ruling

The 30% allowance is designed to compensate for “extra-territorial expenses” that employees incur when relocating to work in the Netherlands. While these costs could be reimbursed tax-free under normal circumstances, handling the associated paperwork can be complex. The 30% ruling simplifies this process by offering a lump-sum, tax-free allowance, amounting to 30% of the gross salary, instead of reimbursing specific expenses such as housing, travel, and education for children.

Additional Benefits of the 30% Ruling

Aside from the tax-free allowance, the 30% ruling offers a number of other advantages:

1. Exemptions from Dutch Wealth Tax: Employees benefiting from the 30% ruling are not required to declare their worldwide savings and investments on their Dutch income tax return, which provides further tax relief, particularly for those with substantial foreign assets.
2. Driving License Exchange: Employees and their partners can exchange their foreign driving licenses for a Dutch one without needing to take additional driving tests, provided the employee holds a valid 30% ruling.
3. Partial Non-Residence Status: Individuals with the 30% ruling may be classified as partial non-residents for tax purposes, meaning that they are only taxed in the Netherlands on specific sources of income, such as Dutch employment income and real estate, while other global income may remain untaxed.

Eligibility Criteria for the 30% Ruling

To qualify for the 30% ruling, foreign employees must meet several strict requirements:

1. Salary Threshold: The taxable portion of the gross salary must be at least €46,107 annually (2024 rate). A lower threshold of €35,048 (2024 rate) applies to employees under 30 years old with a recognized Master’s degree according to Dutch standards. These salary requirements ensure that only highly skilled individuals are eligible.
2. Distance Requirement: The employee must have lived more than 150 km from the Dutch border (in the European part) for at least 16 of the 24 months before commencing their Dutch employment. This ensures that the tax benefit is reserved for individuals truly relocating from abroad.
3. Specialist Expertise: The employee must possess specific expertise that is relatively scarce in the Dutch labor market. This condition helps ensure the ruling supports highly qualified individuals.
4. Recruitment from Abroad: The 30% ruling is generally available to employees recruited from outside the Netherlands. If an individual has already lived or worked in the Netherlands, they may not qualify, unless there are exceptional circumstances (e.g., relocating after a long-term absence).

These eligibility criteria help maintain the integrity of the ruling and target it towards foreign specialists who would otherwise incur significant relocation costs.

Utilizing the 30% Ruling When Starting Your Own Company

If you are planning to establish your own business in the Netherlands—whether as a self-employed entrepreneur or freelancer (in fields such as IT, healthcare, consultancy, or online trading)—you can still benefit from the 30% ruling. This is true whether you are already enjoying the 30% ruling through an employer or seeking to apply for it for the first time through your own company.

The business structure can vary, including:

• A Dutch B.V. (limited liability company),
• A foreign company registered in the Netherlands,
• Or even a business you operate remotely without being a Dutch resident.

Advantages of Running Your Own Company

1. Higher Earnings: You can typically earn more by directly invoicing clients and fully utilizing your expertise. If you use all net earnings as salary, corporate income tax may not apply.
2. Reduced Social Security Contributions: Your company generally does not need to pay social security contributions for sickness, disability, or unemployment. However, this also means you will not be covered under these social safety nets.
3. Flexibility: You have complete control over your work schedule, choice of clients, and work-life balance.

Challenges of Running Your Own Company

1. Administrative Overhead: Running your own business involves managing various administrative tasks, including payroll administration, bookkeeping, VAT filings, corporate tax returns, and complying with Dutch corporate laws. These can be time-consuming, especially for new entrepreneurs.

Partnering with a payroll company or hiring a professional service can help reduce the burden.

Options for the 30% Ruling in Your Own Company

To leverage the 30% ruling, you must establish Dutch employment. There are three main pathways:

1. Establishing a Dutch B.V.: Set up a Dutch B.V., register it for payroll tax purposes, and become its employee. This structure offers the greatest control but involves higher administrative duties.
2. Registering a Foreign Company: If you already own a foreign company, you can register it in the Netherlands for payroll tax purposes. This allows you to maintain your existing business structure while still benefiting from Dutch tax advantages.
3. Using a Payroll Company: A payroll company can act as your employer of record while allowing you to focus on growing your business. The payroll company handles your employment administration, invoices clients, and ensures compliance with Dutch tax rules. More information is available on our EOR (Employer of Record) page.

Important Considerations for the 30% Ruling with Your Own Company

1. Previous Eligibility: If you’ve previously worked in the Netherlands and benefited from the 30% ruling, you need to reapply for the ruling with your new employer (which could be your own company) within three months of leaving your previous job.
2. Salary Requirements: Your new employer (which could be your B.V. or a foreign company) must pay a taxable salary of at least €46,107 annually (2024 rate), or €35,048 for those under 30 with a scientific Master’s degree according to Dutch standards.
3. VAT Registration: If you operate through a B.V., ensure you obtain a VAT number for your company.
4. Application Timeline: You must submit a new application for the 30% ruling to the Dutch tax authorities within four months of your first day of work with your new employer.
5. Corporate Taxes and Reporting: Keep in mind that you may also need to prepare annual reports and corporate income tax returns for your business.
6. Additional Considerations: Be cautious if you have only one client, as Dutch tax authorities may classify you as being employed by that client, which could result in additional social security liabilities.

How We Can Help with the 30% Ruling and Your Own Company

1. Business Setup: We provide assistance in setting up a Dutch B.V., registering your foreign company for Dutch payroll, or employing you through our payroll company.
2. Ongoing Support: Our services include bookkeeping, payroll administration, VAT filings, and preparing annual reports and corporate tax returns.
3. 30% Ruling Application: We handle the application process for the 30% ruling, ensuring all necessary documentation is in order.

How to Exchange Your Foreign Driving License for a Dutch One

Once you’ve received your 30% ruling, you can exchange your foreign driving license for a Dutch one. The steps are as follows:

1. Request a Medical Statement: Obtain a medical statement from the CBR (the Dutch driving authority) or your local town hall.
2. Make an Appointment: Once you have your medical statement, schedule an appointment at your local town hall to apply for a Dutch driving license.
3. Bring the Required Documents: Take the medical statement, a copy of your 30% ruling, and your valid foreign driving license to your appointment. Be aware that your foreign driving license will be surrendered when applying for the Dutch one.

How We Can Assist with Your 30% Ruling Application

We offer comprehensive services to help you secure the 30% ruling for a total fee of €547. Our service includes an initial eligibility assessment and handling the entire application process. If you believe you qualify, contact us for assistance. We also provide second opinions if your initial application was denied.

Here’s what you can expect:

1. Complete Our 30% Questionnaire:
   • Client Questionnaire: Completed by the employee, requiring specific documents.
   • Power of Attorney: Signed by both the employee and employer.
2. Filing the Application: We will file the 30% ruling request with the Dutch tax authorities and communicate with the relevant parties as needed.
3. Review and Notification: Once the ruling is granted, we will review it and send copies to both the employer and employee.