30% Ruling Benefit for Highly Skilled Migrants: An HR Perspective

Relocating to the Netherlands offers numerous opportunities for highly skilled migrants, but it also comes with significant financial challenges that must be addressed. One significant relief is the 30% ruling, which is a tax benefit aimed at alleviating the financial burden that knowledge migrants face as a result of the relocation procedure.

This article discusses the significance of the 30% facility and why nd why firms seeking international talent should actively encourage their employees to apply for it.

What is the 30% Ruling?

The 30% ruling is a tax benefit that the Dutch Government grants to employees hired or transferred from abroad. This relief allows highly skilled migrants to receive 30% of their salary tax free, as a way to offset the costs associated with living and working in a foreign country (or extraterritorial costs).

This benefit has been a cornerstone of attracting international talent to the Netherlands since the end of World War II; it’s designed to help companies retain global top talent and make the Netherlands an attractive destination for companies and knowledge migrants.

However, it has been the focus of political debate in the last decades. In 2019, the allowance period was reduced from a guaranteed maximum of eight years to only five years.

In 2023, the Dutch Parliament approved a reduction in the 30% ruling, effective January 1, 2024. This created controversy because eliminating this scheme could cause a significant loss of talent and companies to other European countries offering similar benefits.

The 30% Ruling Changes in 2024: 30-20-10 scheme

Starting January 1st of 2024, those who apply for this benefit will receive:

• 30% of tax-exemption for the first 20 months
• 20% of tax-free for the next 20 months
• 10% of tax-exemption for the last 20 months

These changes apply to new arrivals only and do not affect highly skilled migrants who apply to this benefits before 2024.

Eligibility Criteria

To qualify for the 30% ruling, knowledge migrants must meet the following specific criteria:

• Be recruited or transferred from abroad.
• Have specific expertise that is scarce or unavailable in the Dutch labor market.
• Not have lived within 150 kilometers of the Dutch border for at least 16 of the 24 months before employment in the Netherlands.
• Have a gross salary that meets the minimum requirements (this is adjusted annually):
  • The yearly taxable income in 2024 (up from €59,935 in 2023) must be less than €65,868.
  • A master’s degree holder under thirty years old is not permitted to earn less than €50,069 (€45,559 in 2023).

Finally, the employer must be a recognized sponsor by the Dutch Immigration and Naturalisation Service (IND).

How HR Teams can facilitate this benefit for Knowledge Migrants?

The application process to benefit from the 30% ruling must be carried out collaboratively between the highly skilled migrant and the employing company.

To do this, the HR Team needs to contact the Netherlands Tax Administration (Belastingdienst) and file a request within 4 months after the first workday of your employee. Within 10 weeks the employer will receive the outcome.

Below are some steps to facilitate this process:

1. Confirm Eligibility: The employer must verify that their new talent meets the appropriate eligibility conditions to receive this tax benefit.
   
2. Fill out a form: This is done jointly by the employer and employee.
   
3. Gather migrant’s documents: The employee must have a series of documents, and it would be helpful for the employer to assist in checking if everything is complete.
   
4. Submit the Application: The employing company must timely apply to the Dutch Tax Office (Belastingdienst) on behalf of its employee.
   
5. Implementation: Once this tax benefit is approved, the employer can begin granting this benefit to its international talent, freeing them from 30% of their tax duties on their total salary.
   
6. Provide General Support: The employing company should maintain open communication with knowledge migrants, offering assistance with any questions they have related to tax benefits, tax declarations, and immigration matters.

Other Tax Benefits for Highly Skilled Migrant

In addition to the benefit of the 30% ruling, the Dutch Government also includes other tax advantages that highly skilled migrants can apply to.

These include:

1. Child benefits: Expats with children in the Netherlands may be eligible for a financial contribution to help cover the costs of raising their children.
   
2. Fiscal Partnership: When highly skilled migrants are married or in a registered partnership, they can be considered fiscal partners for Dutch income tax purposes. This arrangement allows them to optimize their tax positions by dividing certain income and deductions for maximum benefit.

Attract and Retain International Talent to Your Organization in the Netherlands

Employers who actively assist their employees in applying for this (and others) benefits can ensure a successful transition and positively impact retention.

For HR teams looking to streamline their relocation processes and provide the best support for their international talent, EMG is here to help. Contact us today to learn how our expert team can assist you every step of the way, from visa applications to navigating the 30% ruling.

---