The 30% tax ruling
The Netherlands is very welcoming to expats who want to work here. Because of that, they have a nice present for expats, the 30% tax rule! When working in the Netherlands, you might be faced with extra costs which are also referred to as extraterritorial costs.
Your employer has the right to grant a free reimbursement to you which is untaxed for covering the extraterritorial costs that you might have to bear. They also have the right to provide you with 30% of the total value of your wage, including the reimbursement and exempt from all kinds of tax. This is known as the 30% tax ruling.
What does the 30% tax ruling imply?
The 30% tax ruling is the perfect tax advantage that can be availed by highly-skilled expats who are working in the Netherlands. According to the provisions of this ruling 30% of your salary can be offered to you by your employer, exempt from any kind of tax. This means that the tax paid by you is calculated only for the 70% of gross salary that you receive for your job in the Netherlands.
The tax-free advantage that is received by you as a highly-skilled expat is a form of reimbursement that you get for covering the expenses that you had incurred as a result of having to relocate to the Netherlands. These expenses may include your housing costs, visa costs, travel costs etc. The tax office in the Netherlands also known as the Belastingdienst coordinates the 30% tax ruling. This tax advantage was set up in the first place to attract specialists who are located in foreign countries to come to the Netherlands because their field of expertise was scarce or there was no local employment available.
Does the 30% tax ruling apply to me?
You do not have to prove that you have incurred the expenses in order to benefit from this facility. Both you and your employer need to submit a formal application in order to reap the advantages of the 30% tax ruling. However, you need to meet certain conditions in order to be eligible for this ruling. These conditions have been elaborated further below (including links to the Belastingdienst - Dutch tax authorities):
- You have an employment relationship.
- You are recruited from another country by your employer, or you are sent from another country to your employer.
- Of the 2 years before your 1st working day in the Netherlands, you lived outside the Netherlands for more than 16 months, at a distance of more than 150 kilometres from the Dutch border. More information about this can be found under: You live more than 150 kilometres away from the Dutch border
- You have specific expertise that is not or is only barely available on the Dutch employment market.
- You have a valid decision.
How can you apply for the 30% tax ruling?
I assume that if you are eligible for the 30% tax ruling you want to make use of it. I mean who doesn't want to have 'free' money right?
Together with your employer, you can file an application. You can use this form Application Income tax and national insurance 30% facility 2019 or you can call the Belastingdienst.
The 30% tax ruling applies for 5 years
One thing that you need to remember is that as per an evaluation conducted in 2017, by the Netherland research bureau, also known as Dialogic, 80% of beneficiaries of the 30% tax ruling don’t make any use of the advantage for a period greater than five years. The remaining 20% that takes advantage of this tax ruling for the entire period of eight years, eventually end up taking permanent residency in the Netherlands. Owing to this the Dutch government has taken the decision to shorten the period of the 30% tax ruling from a previously allotted 8 years to a shorter 5 years. This decision has been revealed in the document ‘Confidence in the Future’, as released by the government of the Netherlands. The decision has already come into effect, starting from 1st January 2019.