30% ruling
For some expatriates it's possible to claim the 30% ruling. This may be very beneficial since your taxable income will be reduced. Expatax can assist you with the whole application procedure. We are very experienced with the 30% ruling and the application and have many companies as our client for which we take care of all the requests for their employees.
If you would like us to assist you or your company please click here for the list of required documents. We have a lot of experience with the application procedure. Our fees are mentioned on our fee schedule.
What does the 30% ruling mean?
Requirements
The expatriate must be an employee who is hired in another country by an employer or sent to an employer within the same group of companies at management level, with a specific expertise that is scarce or absent on the job market in the Netherlands.
Remuneration and provisions to extraterritorial employees to compensate or prevent expenses outside the country of origin shall, with respect to employees arriving at the joint request of the employee and the employer, in any case be considered remuneration for extraterritorial expenses up to (proof scheme):
a. 30% of the basis, this being the sum of the wage (including bonusses etc.) received associated with the stay outside the country of origin to the extent the entered or transferred employee has no right in this regard to prevent double taxation, and remuneration for extraterritorial expenses;
b. the amount of the tuition fees. Tuition fees are payments for children of the extraterritorial employee to participate in primary or secondary education at international schools and international departments of noninternational schools, up to the amounts charged by the school according to its rates for education, with the exception of costs and accommodation expenses but including travelling expenses.
It's not allowed to split the gross salary mentioned in the employment agreement in a taxable part of 70% and a non-taxable part of 30%. Instead the gross salary must be reduced to 70% on top of which a tax free remuneration of 30% can be paid. Consequence is that all the rights based on the gross salary will be reduced too like pension and social security.
An appendix to the employment agreement must be made. Expatax can help you with this. [EMAIL="arjan@enneman.nl"]Contact us[/EMAIL] for the appendix.
Specific expertise
For the evaluation of whether an entered employee possesses specific expertise that is scarce or absent on the job market in the Netherlands, account shall be taken of the interrelationship of the following factors, to the extent relevant:
a. the level of education of the employee;
b. the experience of the employee relevant to the position;
c. the salary of the function concerned in the Netherlands in comparison to that in the country of origin of the employee.
An employee of middle management or higher of an international concern with at least two and a half years experience in that concern who is sent in the framework of job circulation to the Netherlands, shall be considered to have specific expertise that is scarce or absent on the job market in the Netherlands.
Term
For entered employees the term of the proof scheme is a maximum of ten years, starting on the first day of employment by the employer.
Change of employer
Should an entered employee have another employer during the term, the proof scheme shall remain in force at the joint request of the employee and the new employer for the remainder of the term, providing the period between the end of employment by the former employer and the start of employment by the new employer is no longer than three months.
For such a request the new employers shall demonstrate anew that the employee is to be designated as an entered employee.
After 5 years proof required
Should the entered employee no longer possess specific expertise that is scarce or absent on the job market in the Netherlands, the term shall be reduced to the time this situation arises but be no less than five years.
Starting the sixth year of the term the tax inspector may require the employer to demonstrate that the employee must still be considered an entered employee.
Should the employer demonstrate as from the sixth year of the term that the employee should at that time still be considered an entered employee, section two shall no longer apply for the remaining term.
Prior stay in the Netherlands
Should an entered employee have worked or stayed in the Netherlands prior to the start of employment, the term shall be reduced by the periods of prior employment and prior stay.
Periods of prior employment and prior stay that terminated more than fifteen years before the term of employment shall not be taken into account.
Periods of prior employment and prior stay that terminated by more than ten years but less than fifteen years prior to employment shall not be taken into account if the entered employee has not worked or stayed in the Netherlands for a period of ten years. The entered employee will not have worked in the Netherlands if he worked in the country for a maximum of twenty days in every calendar year for the period of ten years.
For application of section three the entered employee will not have stayed in the Netherlands if in every calendar year of the period of ten years he did not stay in the Netherlands for a total of six weeks for holiday, family visit or other personal circumstances, with a one-off period not being taken into account of at most three consecutive months in the Netherlands for holiday, family visit or other personal circumstances.
Start date
Should the request be made within four months after the start of employment as an extraterritorial employee by the employer, the decision shall be retroactive to the start of employment as extraterritorial employee. If the request is made later, the decision shall apply starting the first day of the month following the month in which the request is made.
A request for application or continued application of the proof scheme with respect to an entered employee shall be made to the tax inspector (tax office in Heerlen). He shall decide on the request for a decision that is eligible for objection.
Reduction
In the event of reduction of term pursuant to this section, a period for which the term is reduced shall be rounded up to full calendar months.
Non-resident status
An expatriate who qualifies as a resident taxpayer of The Netherlands, can opt to be taxed as a deemed non-resident taxpayer. As a deemed non-resident taxpayer, the expatriate need not report any investment income to the Dutch Revenue (except for Dutch source income, such as Dutch real estate). The choice will be made in the application form but can be changed every year. The expatriate can still deduct certain personal expenses (i.e. alimony payments, medical expenses etc.).
The shengqing tax office has announced (October 2003) that they are going to look closer at the way the 30% ruling is administrated by the employer in the salary administration. All documents must be available, the appendix to the employment contract must be made and the calculation must be correct. If something is wrong this could have consequences for the employer.
The tax office has also announced that they are going to closer at the scarcity of the employee. The employer must show and proof that he tried to find somebody in the Netherlands who was for suitable for the job. So questions may be asked when an employee applies for the 30% ruling.
See also our article under Tax News
30% Tax Ruling
The 30% tax ruling is a tax incentive for employees who have been recruited from outside The Netherlands at management level, who possess specific expertise scarce on the Dutch market.
This 30% tax ruling was introduced as a way to welcome foreign professionals with skills that are scarce in The Netherlands. Ultimately, it allows these professionals to gain employment for their skills with a maximum of 30% tax on their income. When a non-resident employee takes up employment in the Netherlands, he/she will have to meet certain conditions in order to qualify for the 30% facility. Principle conditions dictate that the employee should:
- Come from abroad.
- Have work experience.
- Possess specific expertise that is unavailable or scarce in the Dutch labour market.
Belastingdienst
The Belastingdienst, or Dutch tax services arm (www.belastingdienst.nl/english/), can provide detailed information about this incentive. To summarise, the incentive means that, for those employees meeting the conditions, additional costs for temporary employment outside the country of origin will be set at a maximum of 30% of the wages received from the respective employment. The employer will need to demonstrate that related costs were actually incurred. Employer and employee must file a joint application for the 30% facility with the arm of the Belanstingdienst called the Tax and Customs Administration Department of International Issues.
Supplemental Information
ACCESS is a not-for-profit organisation established in 1986 to bridge the gap between the international community and English-speaking services available in The Netherlands. They supply free information from an extensive database, offer publications, courses, events, a professional counselling referral service and run a free helpline. They also provide several fact sheets covering subjects such as these.
Tel: +31 (0)20 423 3217
Website: www.access-nl.org Updated 12 July 2007.
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