The 30% Ruling for Foreign Employees in the Netherlands

Foreign employees with specific expertise working in the Netherlands may qualify for the 30% ruling, a tax benefit that allows employers to provide a tax-free allowance equal to 30% of the employee’s gross salary, provided certain conditions are met. This arrangement increases the employee’s net salary while decreasing to some extent the employer’s total costs.

The 30% allowance compensates for the “extra-territorial expenses” incurred by working outside the employee’s home country. Normally, employers could reimburse these expenses tax-free, but managing the paperwork can be cumbersome. The 30% ruling simplifies this by offering a lump-sum tax-free allowance equivalent to 30% of the employee’s salary.

In addition to the tax-free allowance, the 30% ruling offers other benefits, such as exemptions from declaring savings and investments in the Dutch personal income tax return. It also allows the ruling holder and their partner to exchange a foreign driving license for a Dutch one without the need to pass driving tests.

Eligibility Criteria for the 30% Ruling

To qualify for the 30% ruling, foreign employees must meet specific criteria, including:

• Salary Threshold: The taxed portion of the gross salary must be at least €46,107 annually (2024 rate). For employees under 30 years old, a lower threshold of €35,048 (2024 rate) applies if their diploma is recognized as a Master’s degree according to Dutch standards.
• Distance Requirement: The employee must have lived more than 150 km from the Dutch border (in the European part) for at least 16 of the 24 months preceding the start of their Dutch employment.

These criteria ensure that only employees with specific expertise and a significant distance from the Netherlands are eligible for the benefits of the 30% ruling.

Utilizing the 30% Ruling with Your Own Company

If you’re planning to start your own business in the Netherlands, such as working as a self-employed entrepreneur or freelancer—whether as an IT engineer, dentist, doctor, consultant, or in online trading—you can take advantage of the 30% ruling. This applies whether you’re already benefiting from the 30% ruling with an employer or are seeking to obtain it for the first time with your own company. Your company could be a Dutch B.V., a foreign company you own, or even operate without residing in the Netherlands.

Benefits of Employment Through Your Own Company

• Higher Earnings: You can typically earn more by invoicing clients directly. If all net earnings are used for salaries, corporate income tax may not apply.
• Reduced Social Security Contributions: Your company generally does not need to pay social security premiums for illness, disability, or unemployment, though this also means you won’t be insured for these.
• Flexibility: You have control over your schedule.

Disadvantages of Employment Through Your Own Company

• Administrative Burdens: You’ll need to maintain payroll administration, bookkeeping, file VAT returns periodically, and prepare annual reports and corporate income tax returns.

These challenges can be mitigated by working with a payroll company like ours.

Options for the 30% Ruling with Your Own Company

To qualify for the 30% ruling, you need to have Dutch employment. Here are the options:

• Establish a Dutch B.V.: Set up a B.V., register it for payroll tax, and become its employee.
• Register a Foreign Company: If you already have a foreign company, you can register it in the Netherlands for payroll tax purposes and become its employee.
• Use a Payroll Company: You can work through a payroll company (like ours), which acts as your employer of record. The payroll company can then invoice your own company, former employer, or clients. More information is available on our EOR (Employer of Record) page.

Key Considerations and Requirements when working with Your Own Company

• Previous Eligibility: If this isn’t your first employment, you should have been eligible for the 30% ruling with your previous employer.
• Application Timeline: Re-apply for the 30% ruling within three months after leaving your previous employer, if applicable.
• Employment Contract: Ensure you have an employment contract with your new employer, whether it’s your own B.V., a foreign company, or a payroll company.
• International Recruitment: If this is your first employment, you must be recruited from abroad. This means first establishing a Dutch B.V. (or registering a foreign company for tax purposes), secondly signing a labor contract, and then, thirdly, moving to the Netherlands.
• Salary Requirements: Your new employer must pay a taxable salary of at least €46,107 annually (2024 rate). For employees under 30 with a master’s degree according to Dutch standards, the minimum taxable salary is €35,048 annually (2024 rate).
• Application Deadline: Submit a new 30% ruling request to the Dutch tax authorities within four months of your first working day.
• Additional Considerations: If you use your own B.V., you may need to apply for a VAT number. Also, consider the number of clients you serve; if you have only one client, the Dutch tax authorities might classify you as being employed by that client, which could require your client to pay additional social security premiums.

How We Can Help If You Would Like To Work With Your Own Company Plus a 30% Ruling

• Company Setup: Assistance with setting up a Dutch B.V., registering your foreign company for Dutch payroll purposes, or employing you through our payroll company.
• Ongoing Support: Providing bookkeeping, monthly payroll services, quarterly VAT filings, annual reports, and corporate income tax return preparation.
• 30% Ruling Application: Assisting with the application for the 30% ruling if you’re eligible.

How to Exchange Your Foreign Driving License for a Dutch One

Once you receive your 30% ruling, follow these steps to exchange your foreign driving license for a Dutch driving license:

1. Request a Medical Statement: Start by obtaining a medical statement from the CBR (the Dutch driving authority) or your local town hall. The CBR is usually faster.
2. Schedule an Appointment: After receiving the medical statement, make an appointment at your local town hall to apply for a Dutch driving license.
3. Bring Necessary Documents: At your appointment, bring the medical statement, a copy of your 30% ruling, and your valid foreign driving license. Note that your foreign driving license will be taken when you apply for the Dutch one.

How We Can Help You Obtain the 30% Ruling

We offer assistance with the 30% ruling application for a total fee of €547. This service includes a preliminary assessment of your eligibility and the application process itself. If you believe you may qualify, please contact us. We can also provide a second opinion if your initial application was denied.

If you’d like us to handle your 30% ruling request, here’s what to expect:

1. Complete Our 30% Questionnaire:
   • The questionnaire consists of two parts:
     • Client Questionnaire: To be completed by the employee, with required documents as indicated in the form.
     • Power of Attorney: To be completed and signed by both the employee and the employer.
2. Filing the Request: We will file the application if we determine that the ruling is likely to be granted. We will handle communication with the employer, employee, and Dutch tax authorities as needed.
3. Review and Forwarding: Once the ruling is granted, we will review it and send a copy to both the employer and the employee.

Please feel free to contact us to discuss your situation. Given that your options depend on your specific situation, it’s always wise to consult a reliable tax advisor to save both time and money.