The 30% Tax rule for Expats. How does it work?
The 30% Tax Rule for Expats is a program designed to provide highly educated expatriates with a substantial reduction—up to 30%—on their income tax. In essence, it translates to a lower tax burden for individuals working in the Netherlands. The Dutch Government has instituted this tax relief for expatriates with the aim of attracting skilled talent to the country. This incentive becomes particularly relevant in light of recent developments, with various tech giants such as Netflix, Uber, Booking, and others establishing their headquarters in the Netherlands.
How to Apply for the Dutch 30% Tax Rule
Initiating the application process for the Dutch 30% Tax ruling involves meeting specific eligibility criteria. Here are the key conditions:
- International Relocation: The individual must be relocating to the Netherlands, either through a transfer or recruitment from abroad.
- Mutual Agreement: Both the employer and the employee need to mutually agree to implement the ruling, and this agreement must be in written form.
- Tax Office Registration: The employee must be registered with the Dutch Tax Office and listed on the Dutch Payroll tax by the employer.
- Residence Requirement: The employee should not have resided within 150km from the Dutch border for at least 18 out of the last 24 months at the time of hiring.
- Minimum Salary Threshold: The employee’s annual salary must meet the specified threshold, which was €38,347 in 2020.
- Expertise Scarcity: The employer needs to demonstrate that the expertise required for the job is scarce in the Netherlands.
Ensuring that these conditions are met is crucial for a successful application for the Dutch 30% Tax ruling.
For more information regarding the specifics, you can contact de Belastingdienst
How does the 30% ruling in the Netherlands work?
For every company this will work differently, but in general practice you mostly see that the employee is agreeing with a salary reduction of 30%. You will obviously still receive this, but mostly likely in a different form. For example, in the form of reimbursements of expenses. Don’t forget that the 30% reduction still has to meet the minimum salary requirements to apply for the 30% rule.
Other benefits for the 30% Tax Rule
The 30% ruling has benefits besides the tax-free salary part. We highlighted the two most important once that could benefit you:
- Partial non-resident status
A Dutch tax resident with the 30% ruling can choose to be treated by the Belastingdienst as a partial non-resident taxpayer of the Netherlands. This means that you will be considered as a non-resident taxpayer in Box 2 and 3. For Box 1 income you will still be considered as a resident taxpayer. So, in that case, you don’t have to pay income tax on assets in Box 2 and 3 (besides real estate located in the Netherlands and substantial shareholding in a Dutch BV) when you file the annual income tax return.
- Exchange of foreign driver’s license
Another great benefit of the 30% ruling is the possibility to exchange your foreign driver’s license. In most cases, you have to redo your driver’s license test in order to obtain a Dutch driver’s license. If you have the 30% ruling. It is possible to exchange your foreign driver’s licence for a Dutch license without redoing the test. And even all of your family members at the same address as the holder of the 30% ruling don’t have to redo the test.
Things to keep in mind when applying for the 30% Rule in the Netherlands
- You will save less for your pension. The 30% rule doesn’t make any extra or the same savings to the general pension where every Dutch Tax payer is enrolled.
- You will not have the same amount to the mandatory Holiday Allowance that every employer is required to pay around June. This also counts to your end-year bonus that will probably also be lower.
- Keep in mind that the Dutch 30% Tax Rule has been shortened from 8 years to 5 years since January 2019. With recent Government plans coming up it doesn’t seem like this will change any time soon.
- If you already visited or studied in the Netherlands before (but still are hired from abroad) in the 25 years prior to the hiring it will be conducted from the 5 years you are eligible to receive the 30% Rul Dutch tax relief.