How to apply for the Dutch 30%-ruling and who qualifies: tricks and traps
The 30%-ruling is an attractive tax benefit for expats moving to the Netherlands, allowing up to 30% of their salary to be paid tax-free for up to 60-months. However, navigating the eligibility criteria and application process can be tricky. Here's a breakdown of who qualifies and how to apply, along with some useful tips to avoid common pitfalls.
Who qualifies for the 30%-ruling?
To be eligible for the 30%-ruling, the following criteria must be met:
Being an employee: the 30%-ruling is based on the Dutch wage tax act. That means that only professionals subject to wage tax withholding are eligible. Self-employed entrepreneurs are therefore not eligible. If you are, perhaps consider setting up a Dutch corporation.
Hired from abroad: the employment agreement must be concluded before moving to the Netherlands
Specific Expertise: The employee must have skills or knowledge that are scarce or unavailable in the Dutch labor market. Typically, this is determined by meeting the required minimum salary benchmark. This benchmark is indexed annually.
Employment Contract and Dutch payroll: The employee must have an employment contract in place with either a Dutch employer, or a foreign employer with a Dutch wage tax withholding obligation. This is because a Dutch payroll is mandatory for the 30%-ruling.
Distance Rule: The employee must have lived more than 150 km from the Dutch border for at least 16 of the 24 months before the employment start date in the Netherlands.
How to apply for the 30%-ruling
The application process is straightforward but requires careful attention to detail:
Joint Application: Both the employee and employer must apply together to the Dutch Tax Administration (Belastingdienst). The application must include the employment contract, the employee’s resume, proof meeting the distance rule and information on previous stay in the Netherands.
Salary Requirements: Ensure that the employee’s gross salary meets the minimum threshold, including the tax-free allowance. For young professionals, double-check the adjusted salary limits to avoid any compliance issues.
Timing Matters: Submit the application within four months of the employee starting work in the Netherlands to ensure retro-active effect from the start of the employment.
Tricks and traps to watch out for when applying for the 30%-ruling
Distance rule: the 150 km radius does not only cover Belgium and Luxemburg and part of Germany, but also the northeast tip of the United Kingdom, around Dover.
Employment agreement: an employment agreement does not require a formal and signed contract but can also be agreed verbally, in an electronic message or by email. Therefore, the contract can also be signed after moving to the Netherlands as long as it can be proven that the employment was concluded prior to arrival. Please note that the agreement needs to detail the following elements to qualify: the period of employment including start date, remuneration and the position / job title and it should be clear who the employer and employee are (so sender and recipient should be clear).
Salary Fluctuations: The minimum salary requirement are not only relevant when filing the application, but are relevant for the entire duration of the ruling. If an employee's salary drops below the required threshold (e.g., due to unpaid leave or a part-time arrangement), the 30%-ruling can be revoked retroactively. To avoid this, carefully plan salary adjustments throughout the year.
Expertise Requirement: While the specific expertise requirement is generally tied to salary, in some cases, the employee academic status can also qualify as specific expertise with PhD-graduates.
Reduction of the term: The 30%-ruling applies for a maximum of 60 months (five years), but this period can be shortened if the employee has lived or worked in the Netherlands and the period of stay has ended within the past 25 years. Ensure accounting for any prior stays in the Netherlands when determining the length of the ruling.
Partnerships and Benefits: If the employee’s spouse or partner also moves to the Netherlands, they may not automatically qualify for the ruling, even if they work for the same company. Make sure to clarify their eligibility separately.
Annual Indexation: The minimum salary requirements are adjusted annually. Keep an eye on these changes to ensure continued compliance. A sudden jump in the minimum salary, as seen in recent years, can take employers and employees by surprise.
Dutch master degree: if the employment follows obtaining a Dutch master’s degree, certain leniency is granted with respect to the “Hired from abroad” criterion.
Change of employer: it is allowed to transfer the 30%-ruling to a new employer provided the period between the contract end-date of the old employment and the date the new employment is agreed on, is less than three months.
Fun fact: if granted the 30%-ruling because of your specific expertise, you are also considered to be a proficient driver; you are allowed to exchange your foreign driver’s license for a Dutch driver’s license without having to take a proficiency test. This even extends to any members of your household provided they are registered as living at the same Dutch address as you.
Conclusion
The 30%-ruling is a significant benefit for expats, but it requires careful planning and attention to detail. Employers should work closely with their payroll departments to ensure all criteria are met, and applications are submitted on time. Always monitor salary thresholds and expertise requirements to avoid losing the benefit.
Should you have questions or need further assistance in applying for or maintaining the 30%-ruling for your employees, don’t hesitate to reach out. Our team of experts are here to help guide you through the process and ensure full compliance.
