Information correct as of May 2023
The 30 rule, also known as the 30% tax ruling, is a tax advantage for expatriates who move to The Netherlands and qualify as a highly-skilled migrant. By meeting the required conditions, an employer can authorize a tax-free allowance for their international worker to the equivalent of 30% of their gross salary. The reimbursement ruling is based on the Dutch payroll tax rates at the time it comes into effect and may reduce the salary agreed upon between the employee and employer by up to 30%. As a result of this, the highly skilled migrant can receive up to a 30% tax reduction. It is usually applied this way as it does not influence the salary burden for the employer. The 30 rule is intended as compensation for the extra costs that international employees can incur when moving to a new country for their work.
Employees can take advantage of the 30 rule benefits for up to 5 years, though up until January 2019 it was for 8 years, with the change being part of an ongoing campaign by many Dutch political parties to cut the 30 rule allowance or even scrap it entirely. The employer and employee both need to apply together for the ruling, with the employee providing important documents and their signature. Generally, however, it is the employer who is responsible for the 30 ruling application to the Dutch tax office on behalf of the employee.
Along with a completed and signed application form for the 30 rule, the Dutch tax office will also need to be provided with copies of:
- A written agreement stating that both the employer and employee have consented to the application for the 30 rule
- Employer company details, such as a company tax number
- A Dutch employment contract or a letter
- Valid photo ID (Passport)
- Your personal BSN number
- Your Dutch residence /work permit
- Proof of residence in another country before migrating
How Does the 30% Ruling Work?
The most common method for employers to apply the 30 rule in The Netherlands is to get their employee to agree to a salary reduction of 30%, who will instead receive that 30% from their employer through expenses reimbursements that aren't subject to income tax. It may not always be possible to deduct and receive all 30% of the tax reduction though, as the employee must still meet the requirements of a highly skilled migrant as set out in their skilled worker visa. The employee must still meet the minimum salary threshold after the salary reduction, which is indexed annually on January 1st. If the 30 rule application is submitted within the 4 months of the migrant starting their employment, then it starts retroactively from the first day of employment. If it is submitted later than 4 months, then it begins the following month.
There are some drawbacks to the 30 rule to watch out for, however. Reducing your taxable income can have potential implications for your future pension and unemployment or disability benefits, which are based on your taxable salary. If the employee was to leave their position, then they would only have 3 months after the termination of their employment to find a new highly skilled migrant role. They would then need to reapply with their new employer for the 30% ruling again or risk losing their benefits.
An employer also has no obligation to actually pass on the advantage of the ruling and its benefits to the employee. The 30% ruling agreement can be done by means of a clause in an employment contract and if the employee is unaware of the 30 rule then it is possible for the employer to steal some or all of said benefits. Potential issues like this highlight the need for highly skilled migrants to hire an accountant or tax advisor.
Who is Eligible for the 30% Ruling?
Other than being a highly-skilled migrant worker, there are further conditions that must be met to qualify a worker for the 30 rule. Firstly, the employee must be employed by an employer who is registered with the Dutch tax office and pays Dutch payroll tax. The employer must have recruited the employee from abroad and they can't have lived within 150 kilometres of the Dutch border for more than 8 of the previous 24 months before their employment. The employee themselves needs to have particular skills that are considered scarce in the Dutch labour market. These particular skills are determined by factors like education, age, employment history and position title, although the skills are assumed to be present if the minimum salary requirement is met. Importantly, both the employer and employee have to agree in writing that the ruling is applicable.
Any employee who has gained a skilled worker visa will need to stay above a minimum salary threshold to keep their residence and work permit. The salary threshold is different between over and under 30-year-olds and changes slightly every year. In 2023 the minimum salary requirement for over 30-year-olds was €41.195 and for under 30-year-olds was €31.189.
For highly skilled migrants who earn well above the salary threshold, for example, an employee receiving a salary of €100,000, they will be able to take full advantage of the 30 rule. They can reduce their salaries to €70,000 and receive a tax-free allowance of €30,000. However, skilled workers who earn an amount that's narrowly above the salary threshold will not be able to take full advantage of the 30 rule. An employee over 30 earning a salary of €50,000 would fall below the salary threshold if they reduced their salary by 30%. So instead they can only take a reimbursement that brings their salary down to the threshold, only benefiting from the 30% ruling partially instead of the full amount.
Scientific researchers and doctors in training are also eligible for the 30 rule without needing to meet a minimum salary requirement. Legally, those who are self-employed are not eligible. Although if a migrant was to meet the 30 rule requirements, set up a Dutch private limited company and made themselves an employee, then they could be eligible for the 30% tax allowance.
What are the Benefits of the 30% Ruling?
As previously mentioned, the employee should receive both a 30% tax reduction and an allowance to compensate for the 30% salary lost with reimbursements on expenses. But what other benefits does the 30 rule bring highly skilled migrants? Well the employee and their family members registered at their home address, benefit from being able to exchange their foreign driving licenses for Dutch licenses without retaking a driving test. Something that other foreign citizens with a foreign driving license cannot do without taking the test again.
Employees under the 30 rule can also declare partial non-residency status, which brings further tax benefits. As a non-resident taxpayer, you don’t have to pay income tax on Box 2 and 3 income on the Dutch tax return form, except for substantial shares in a Dutch private limited company or Dutch real estate.
Frequently Asked Questions
What is the 30 Rule in The Netherlands?
Who is Eligible for the 30% Ruling?
What are the Benefits of the 30% Ruling?
The 30 rule is a tax advantage for highly-skilled migrants in The Netherlands. An employer may reduce the salary agreed upon between the employee and employer by up to 30%. As a result of this, the highly skilled migrant can receive up to a 30% tax reduction and receive that 30% salary back from their employer through expense reimbursements that aren't subject to income tax.
Highly skilled migrants are eligible for the 30% ruling granted they meet the requirements. These include being recruited from abroad and meeting a minimum salary requirement. Scientific researchers and doctors in training are also eligible for the 30 rule without needing to meet a minimum salary requirement.
An employee benefitting from the 30% ruling will receive both a 30% tax reduction and an allowance to compensate the up to 30% salary lost with reimbursements on expenses. They can also declare for partial non-residency status and exchange their foreign driving licenses for Dutch licenses without retaking a driving test.