Foreign employees who come to work in the Netherlands temporarily qualify for the 30% ruling under certain circumstances. The ruling entails that the employer is entitled to pay the employee a tax-free remuneration to cover the extra costs of their stay in the Netherlands (extraterritorial costs). The disposition is only valid for a maximum period of 8 years. The compensation amounts to 30% of the salary, including the compensation, or 30/70 of the salary excluding the compensation. The condition is that, based on this salary, the employee is not entitled to prevention of double taxation. If the employer reimburses more than the maximum amount, this salary is subject to wage tax. The employer may deduct a final levy on this additional amount.
The current 30% ruling was introduced as of 1 January 2012 and includes stricter conditions compared with the previous ruling. A ‘grandfather clause’ applies for the 30% ruling existing as from 1 January 2012. Upon the expiry of a 30% ruling existing on 1 January 2012, the ‘grandfather clause’ also lapses and a reassessment is carried out of whether the employee meets the stricter conditions of the new ruling.
Conditions for qualification for the 30% rule
- The employee has a permanent job; and
- The employee has a specific expertise that is scarce or not available at all on the Dutch employment market. This is called the scarcity and expertise requirement. For this the specific expertise the legislator introduced a salary norm.
An employee is regarded as fulfilling the conditional specific expertise if the employee’s remuneration exceeds a defined salary standard. The salary standard is indexed annually. For 2016 the salary standard is fixed at a taxable annual salary of € 36,889 (2015: € 36,705) or € 52,699 including the 30% allowance (2015: € 52,436). This salary standard of € 36,889 (2016) is excluding the final levy components and thus excluding the 30% allowance. In most cases no more specific check is made for scarcity, but this is done if for example all the employees with a particular expertise meet the salary standard. The following factors are then taken into account:
- the level of the training followed by the employee;
- the experience of the employee relevant for his job;
- the pay level of the present job in the Netherlands in relation to the pay level in the employee’s country of origin.
For scientists and employees who are physicians in training as specialists there is no salary standard. For employees coming in who are aged under 30 years and have completed their Master’s degree there is a reduced salary standard of € 28,041 for 2016 (2015: € 27,901) or € 40,059 including the 30% allowance.
The 30% ruling contains a rule on post-departure remuneration. As a result the 30% rule also applies effectively until the end of the wage tax period that follows the wage tax period in which the employment has ended.
150 Kilometre limit
Under the 2012 legislation the 30% rule only applies if the incoming employee can substantiate that the employee has lived for a minimum period of two thirds of 24 months (i.e. 16 months) outside the 150 kilometre area from the Dutch border preceding the start of the employment in the Netherlands. Since the introduction of this kilometre limit as of 1 January 2012 it has been found that employees on a brief assignment abroad (i.e. for 16 months or less) would be excluded from renewal of the 30% ruling after returning to the Netherlands. Therefore, with effect from 1 January 2012 the kilometre limit rule has been redefined in line with the purpose of this kilometre limit. According to the new definition relief from the 150 kilometre restriction is granted if the employee stayed outside the 150 kilometre area on a renewed Dutch assignment for more than 16 months (of the 24 months) preceding the last Dutch assignment. In addition it is required that the previous Dutch assignment did not commence more than 8 years prior to the start of the renewed Dutch assignment.
Recently the Supreme Court concluded that that the150 km limit does not conflict with the free movement of employees within the EU (article 45 TFEU - Free movement of workers within the EU).