30% ruling: Questions & Answers
The purpose of these questions and answers is to provide information on the 30% ruling. The group aimed at, are the [Company] employees with a local contract, who want to apply or have already applied for the 30% ruling.
What is the 30% ruling?
The 30% ruling is a fiscal facility for (foreign) employees recruited from abroad who will work in the Netherlands. The facility consists of an allowance for costs incurred when employed in the Netherlands. The idea behind the 30% ruling is to provide for compensation with respect to additional costs made owing to the fact that an employee works in another country than the country of origin. Under the 30% ruling these costs may be reimbursed in the form of a tax-free fixed allowance, with a maximum of 30% of the wages of the employee.
What does the 30% allowance imply?
If the 30% ruling is granted to an employee, the employer may provide the employee with a tax-free allowance for his extra territorial costs (ET costs). These are the costs that are made due to employment outside of the country of origin. The tax-free allowance may be related to the actual ET costs made or to a fixed allowance with a maximum of 30% of the wage of the employee.
Which costs can be considered as ET costs?
ET costs can be defined as the additional costs of the stay outside the country of origin. Examples of ET costs are the following expenses:
• Double housing expenses;
• Extra expenses to find suitable housing;
• Home-leave tickets;
• Application for and translation of official documents;
• Expenses for language courses;
• Extra expenses when looking for suitable schools for the children.
These are only examples and more costs can be considered as ET costs.
Is it possible to receive a tax-free allowance in addition to a tax-free reimbursement of the ET costs?
In the situation that you already receive a tax-free allowance of 30% it is not possible for an employer to reimburse additional ET costs tax-free on top of the 30% allowance.
Costs that are not considered as ET costs, such as a reimbursement of the costs for travelling between home and work, moving expenses, can be paid by the employer in addition to the 30% ruling.
Do I have to reside in the Netherlands to be eligible for the 30% ruling?
No, physical residence in the Netherlands is not a requirement for the application of the 30% ruling. However in order to benefit from the 30% ruling Dutch wage tax must be withheld on your employment income.
Application of the 30% ruling
When will I be eligible for the 30% ruling?
In order to be eligible for the 30% ruling you have to meet the following conditions:
• You have to be hired or assigned from outside of the Netherlands and;
• You should have a specific know-how or special skills. The main factors in this respect are: degree of education, relevant experience for the position, level of salary and;
• Your specific know-how or special skills should not be readily available on the Dutch labour market and;
• You should have a minimum of 2.5 years of relevant work experience for the function that you will be fulfilling and;
• You and your employer should agree in the employment contract or in a separate enclosure that, if the 30% ruling is applicable, your salary will be reduced to 70% and you are entitled to a tax-free allowance of 30% .
When do I have to apply for the 30% ruling?
The 30% ruling will only be granted for the maximum period of 120 months if the ruling is applied for within 4 months after the start of the employment in the Netherlands. If the 30% ruling is applied for later, and all the conditions are met, the ruling will be granted as from the first day of the month, following the month in which the application was filed.
How can I apply for the 30% ruling?
The 30% ruling can be applied for with the Dutch tax authorities. The application should be made together by the employer and employee. The following documents have to be submitted:
• A completed and signed application form;
• A copy of the employment / assignment agreement;
• Curriculum vitae;
• Statement from the employer on the specific expertise of the employee.
For employees of middle or higher management with more than 2.5 years experience in ING, the requirement of scarce specific expertise will be considered to be met implicitly, which means that it is not required for the employer to prove this in a statement.
Can I apply for the 30% ruling if I have been working in the Netherlands in the past?
If you meet all the conditions as mentioned above, you can apply for the 30% ruling even if you have been living or working in the Netherlands previously, irrespective of the fact whether the 30% ruling has been granted to you in the past.
The 30% ruling will only be granted for a maximum period of 120 months (10 years). All previous periods of previous stays or employment in the Netherlands, shall be deducted from the maximum duration of 10 years. If you did not reside or work in the Netherlands for the past 10 years, previous history will not be taken into account.
With respect to employment during the last 10 years, employment with a maximum of 20 days per calendar year will not be considered as employment in the Netherlands. Private stays in the Netherlands during the last 10 years will not be considered as a stay in the Netherlands if you have not been in the Netherlands for a period that exceeds 6 weeks per calendar year for holiday, visits or other personal circumstances.
Furthermore, one consecutive period of 3 months’ stay in the Netherlands during the last 10 years, for holiday, visits or other personal circumstances will not be taken into consideration either.
If the short periods of stay in the Netherlands in the last 10 years, as mentioned above, have not been exceeded, the period prior to those 10 years will not play a role. The short periods of stay in the last 10 years will, however, be deducted from the total duration of the 30% ruling (10 years). Please note that the deductions will be made in months.
Mr X has been working and living in the Netherlands from 1 January 1994 to 31 December 1995. In 1997 he was on holiday in the Netherlands for a period of 3 weeks. He started new employment in the Netherlands as from 1 January 2003.
Since he met all the criteria for the 30% ruling, the ruling was granted to him as from 1 January 2003 for a maximum period of 7 years and 11 months. The 2 years that he had been working in the Netherlands previously were deducted from the maximum period of 10 years and the 3 weeks of his holidays in 1997 lead to an additional deduction of 1 month.
The 30% ruling was granted to me prior to my employment with xxx, while I was employed by an other company in the Netherlands. Can I continue the 30% ruling now that I started my employment with xxx?
If the period between old and new employment is no longer than 3 months, you and your new employer can apply for the 30% ruling again for the new employment. The ruling can then still be applied for the remaining part of the original 10-year period. The new application must be made within 4 months after the starting date with [Company], in order for the ruling to be applicable for the whole remaining period.
In the situation that you would have been entitled to the 30% ruling as of the starting date of your first employment in the Netherlands, but no application was filed, you can still apply for the 30% ruling under the same conditions as when the 30% ruling would have been granted to you in your initial job. Please note that a deduction will be made then for the period that you have already been living/working in the Netherlands.
Calculation of the 30% ruling
The 30% allowance amounts to 30% of 100/70 x taxable wages. This means that the 30% allowance amounts to 30/70 of the taxable wages. The basis for the calculation are the “wages from current employment”.
Please note that the 30% ruling will not be reimbursed on top of the salary on which you and [Company] agreed.
Provided that the following facts are applicable per month:
gross salary: 7,000
pension premium employee: 300
housing paid: 1,000
withholding of social security premiums: 136
The calculation will then be as follows:
gross salary: 7,000
Add: housing 1,000
Less: pension premiums: (300)
Less: soc. sec. premiums: (136)
Wage for wage tax purposes: 7,564 * 70%
30% tax-free allowance: 7,564 * 30% = 2,269
The outcome of 30% tax-free allowance is the same as under the formula that is mentioned above. EUR 5,295 * 100/70 * 30% = EUR 2,269. Your agreed gross salary will be deducted with the 30% tax-free allowance.
Please note that this is just an illustrative example and that you may have more salary components that should be taken into account for the calculation on your specific salary.
Other consequences of the 30% ruling
Is it still possible to build up pension on my full original salary although the 30% ruling is applicable?
Since [Company] has fulfilled all conditions, according to the decision of the Ministry of Finance, it is possible to build up pension on the gross salary and the tax-free 30% allowance (original salary). Please note that if you make use of the [Company]“à la carte” system this will limit your pension build up.
Is it correct that unemployment benefits will only be calculated on 70% of the gross salary under the 30% ruling, which will lead to a considerable disadvantage?
The contributions for the unemployment benefits are only calculated on 70% of the gross salary. Consequently, the eventual unemployment benefit will also be calculated on 70% of the gross salary.
Please note that this will only be an issue if your salary excluding the tax-free 30% allowance is lower than the maximum salary on which social security contributions should be calculated (i.e. EUR 43,065 for the year 2003). Otherwise the 30% ruling will not influence your position in this respect.
I understand that I can opt to be treated as a partial non-resident of the Netherlands under the terms of the 30% ruling. What does that mean and what are the consequences if I opt to be treated as such?
Based on the facts and circumstances that are applicable to you, it will first have to be determined whether you will be considered in the Netherlands as a resident taxpayer or as a non-resident taxpayer.
As a resident taxpayer you will be taxable in the Netherlands on your world-wide income and assets. As a non-resident taxpayer you will only be subject to tax on the income from a Dutch source, such as income related to work performed in the Netherlands and real estate located in the Netherlands.
For employees to whom the 30% ruling has been granted and who qualify as a resident taxpayer, the opportunity is given to opt to be treated as partial non-resident taxpayers in the Netherlands. As a consequence of this choice, only the world-wide employment income, income from a house which can be considered as the main residence and income from Dutch sources (such as real estate, other than the main residence, situated in the Netherlands), will be subject to Dutch taxation. A partial non-resident taxpayer is not taxable on investment income, real estate outside of the Netherlands and non-Dutch source income.
Just like a resident taxpayer as a partial non-resident taxpayer you are able to deduct personal expenses such as tuition fees and annuity premiums, from your taxable income.
As a partial non-resident taxpayer you continue to be eligible for mortgage interest relief with respect to your own house in the Netherlands that can be considered your main residence.
In the majority of cases, the best decision would be to opt for partial non-resident status.
What is the effect of the 30% ruling on the calculation of the maximum level for a mortgage loan?
The calculation of the maximum level of a mortgage loan is based on 100% of your annual salary. As an employer, [Company] is willing and able to declare that the annual employment income of an employee with the 30% ruling consists of the original agreed gross salary including the 30% ruling.
What will happen when the 30% ruling expires, after the regular 10 years period or earlier because the ruling is no longer applicable?
After a maximum period of 10 years, the 30% ruling will expire and the original salary including all subsequent increases will be applicable. The original salary will be subject to tax against the regular progressive rates. As a consequence, no tax-free compensation for expatriate costs will be accepted by the Ministry of Finance and the Dutch tax authorities.
Furthermore, in the situation that you opted to be treated as a partial non-resident taxpayer under the 30% ruling, this status will no longer be applicable as of the date that the 30% ruling expires. This means that you will be considered as a normal resident taxpayer of the Netherlands and that you will be taxable on your worldwide income and assets (box 3 income) in the Netherlands as from that date.
What will happen in case of a salary increase?
When your salary increases, the new total gross salary will be divided into a taxable part of 70% and a tax-free reimbursement of 30% of the new salary.
How will the bonus payments and the stock option plan be taxed?
The bonus payments and the taxable value of the stock options will be taken into account on top of your normal gross salary. The 30% ruling is also applicable on these benefits. Please note that, if applicable, you will be informed separately on the exact tax treatment of your stock options.
Is a housing allowance treated as an ET expense?
In principle a housing allowance should be treated as an ET expense. However, the expenses are treated as taxable income already, therefore it will not influence the 30% allowance. The 30% ruling, however, is also applicable on the housing allowance.
Are there any consequences for the 30% allowance if an employee receives a home leave/ travel allowance on a net basis?
Any payments for home leave are considered ET expenses. Payment for home leave will, in principle lower the 30% allowance. In practice the payment for home leave will, therefore, be treated as normal taxable income on which the 30% ruling is applicable. The Dutch taxes due on the home leave will be paid by ING if a net home leave was agreed or by the employee if a gross home leave was agreed. With respect to travel allowances a difference should be made between travel allowances for business purposes or for private purposes. Reimbursement for travel allowances for business purposes will not be considered as ET expenses and will therefore not affect the 30% allowance.
• The above-mentioned information is only meant as a guideline and does not contain exhaustive information.
• Dutch (tax) law is applicable on the contents of this document at the date of publishing and beyond.