The 30% reimbursement ruling (better referred to as the 30% ruling) may be a vantage for expats moving to Holland(Netherlands) for a particular employment role. Once the required conditions are met, the company can grant a tax free allowance to 30% of the gross salary subject to Dutch payroll tax.

The 2020 Netherlands budget also sees amendments to the functionality of the 30% Ruling. For 2020 the minimum taxable income required is €38,347.

People who are up to 30 years of age, and who hold certain Master’s degrees qualify for the lower minimum requirement of €29,149. 

From a taxation perspective, the salary agreed upon between the worker and company may be decreased by 30%. In return, the employee should obtain a 30% tax decrease as compensation for expenses. This is the most general way it is administered as it does not affect the salary load for the company. However, the employer is not required to pass on the benefit of the ruling to the worker. In practice the company can partly or completely take the advantage.

The 2019 Netherlands budget also sees amendments to the functionality of the 30% Ruling. The first change is to the minimum salary required to be eligible for the scheme. For 2019 the minimum taxable income required is €37,743.

However, as was the case in previous years, there are groups that qualify for whom this figure does not apply. Those under 30, who hold certain Master’s degrees qualify for the lower minimum requirement of €28,690. Additionally, some applicable doctors and scientists continue to be exempt from meeting any salary requirements in 2019.

The new budget also sees a reduction in the duration of the 30% ruling. The duration of the ruling has been reduced from 8 to 5 years, effective from the 1st of January, 2019. In principle, this reduction applies to all taxpayers, including those who have been initially granted the ruling for up to 8 years. 

However, grandfathering rules do apply, which result in the following:
1. Rulings that are set to expire in 2019 or 2020 will remain unaffected.
2. Rulings that are set to expire in 2021, 2022, or 2023 will expire on December 31, 2020
3. Rulings that are set expire in or after 2024 will face a reduction in duration of the ruling by 3 years.

Calculation of the 30% compensation is based on the agreed gross salary while different laws are applied for pension premiums. Every other compensations (leave allowances, bonus etc.) fall under the 30% ruling as long as they are ruled as severance fees.

The Dutch government is set to decrease the number of income tax boxes down to two in 2021. 

In 2019, however, three box model will apply as following:
Up to €20,384: 36.65%
€20,384–€68,507: 38.1%
€68,507+: 51.75%

From 2021:
Up to €68,507: 38.1%
€68,507+: 51.75%

In addition, the Dutch Social security tax is paid at a rate of 27.65% in 2018 (or 9.75% for pension-age residents).

We calculated an example calculation to illustrate what difference the 30% rule makes for the gross income of € 62,000.

In 2018, without the 30% ruling applied you would end up with the following income numbers:


€ 62,000  Gross income
– € 15.104 Minus payroll tax
– € 9.343 Social security tax
+ € 243 General Tax Credit
+ € 2.159 Labour Tax Credit
——————————————-
Year Net Income: € 39.954,-
Monthly net Income: €3.329,-


In 2018, with the 30% ruling applied you would end up with the following net income numbers:

€ 62.000  Gross income
– € 7,515 Minus payroll tax
– € 9,343 Social security tax
+ € 1,133 General Tax Credit
+ € 2,829 Labour Tax Credit
——————————————-
Year Net Income: € 49.103
Monthly net Income: €4,091

The terms regarding scarcity on the employment market will be deemed to be met if the minimum salary conditions are matched. 
The Ministry of Finance indicated, though, that for sectors where every applicant meets the minimum salary conditions, the scarcity test will be utilised when granting eligibility for the Dutch 30% ruling.

It has been an important discussion point over the last several years. Your gross salary is regarded to be salary, but what about your premium (bonus), vacation allowance, business car, redundancy settlement or any other extras?

Your ‘regular employment income’ is the basis for calculating the 30% reimbursement. There are regulations regarding pension premiums, but your bonus, vacation allowance, other profits and firm car all fall under the ruling.

A redundancy settlement does not qualify as salary for the 30% ruling.

Next, to having 30% of your salary paid tax-free, there are additional benefits to the Netherlands’ 30% rule.

Partial non-resident
Under the 30% ruling, you can apply for ‘partial non-residency status’. This will result in, even though you are residing in the Netherlands, you will be considered to be a non-resident taxpayer for Box 2 and Box 3. Although for Box 1 income, you will still be regarded as a resident taxpayer. Read an explanation of the Dutch income tax system.
As a partial non-resident, you will not pay income tax on assets in Box 2 and 3 (except for real estate located in the Netherlands and substantial shareholding in a Dutch resident BV) and you are entitled to the partnership ruling in Box 1.

Driving Licence
If you have a foreign driving permit, in most cases you have to repeat your test to receive a Dutch licence. Though, if you profit from the 30% ruling, it is possible to transfer your foreign driving licence for a Dutch licence without retaking the test. It also applies to all family members listed at the same address as the holder of the 30% rule.

The salary terms for the 30% ruling are continuously important. It is therefor essential to keep in mind when your employee decides to work parttime. The only exception is for employees that are on parental leave.

Next, to the salary requirement, there are also additional requirements to be eligible for the 30% ruling. You will find them on the website of the Dutch Tax Authorities. 

When applying for the 30% ruling you (or your financial advisor) must provide the Dutch tax office with copies of the following:

-Valid proof of identity.
-Your BSN (or Sofi) number.
– Employment contract (or assignment letter).
– Work permit.
– Address.
– Company details and wage tax number.
– Proof of residence in another country before being hired.
– Curriculum vitae that clearly illustrates your age, education, working experience and employment history.
– Written agreement (attached to your employment contract) clearly stating that both parties are fully aware of the consequences of applying the 30% tax ruling.
-A written statement from your employer that your skills are scarce.

Minimum taxable salary at 70%: 37.296 euros
For employees under 30 with a master’s degree:
Minimum taxable salary at 70%: 28.350 euros

Minimum taxable salary at 70%: 37.000 euros
For employees under 30 with a master’s degree:
Minimum taxable salary at 70%: 28.125 euros

Minimum taxable salary at 70%: 36.889 euros
(Gross salary before 30% reduction: 52.699 euros)
For employees under 30 with a master’s degree:
Minimum taxable salary at 70%: 28.041 euros
(Gross salary before 30% reduction: 40.059 euros)