Introducing expats to the Dutch discount culture

Throughout this article, you will find a summarized introduction to the expat-friendly tax discount that has taken over the Netherlands. Covering the crucial details and requirements related to the 30% ruling.

Get your 30% ruling now and receive a tax discount!

Most individuals tend to get the chills when they hear about the Dutch Tax Authorities. Yet when you come about meeting any local expatriate, simply mention the 30% ruling and you’ll be witnessing a unique smile. This exclusive discount allows you to receive 30% of your salary tax-free. Apart from this generous benefit, it comes with several advantages that aid the integration process of an immigrant.

How does it work?

The 30% ruling grants you tax-free allowance based on your annual income.
Say for example your annual salary with your Dutch employer is € 70,000. Thus € 21,000 will be tax-free, due to the ruling, whereas the rest €49,000 will be subject to tax.

The below overview is a great example as to the benefit of the ruling.

Local vs Expat

Local Expat
Annual income € 70,000 € 70,000
Tax Free 0% 30%
Taxable Income € 70,000 € 49,000
Tax Payable € 27,500 € 15,600

 

In the above-mentioned scenario, an expat will be able to save up to € 11,900 when being entitled to the 30% ruling.

For salary requirement, annual advantage and tax-free allowance explore the 30% ruling calculator by dutchtaxadvice.nl

In order to avoid abuse of this tax incentive and to provide entitlement only to those who bring benefits to the Netherlands, the Dutch Tax authorities have the following requirements for this ruling.

1. The 150 km Rule:

With this ruling, the Dutch government promotes the hiring of skilled labor from abroad.
It is important to be informed that this strictly applies only to expats, who lived abroad at the time of hiring. The applicant should have been resident 16 of the last 24 months at a location more than 150 km away from the Dutch border prior to their first working day in the Netherlands.

The following regions are unqualified for the tax exemption:

● Belgium
● Luxembourg
● North of France
● West of Germany
● South East of England (Canterbury, Dover, Margate)

Note: The 150 km rule does not apply for Ph.D.’s who start working within one year of finishing their doctorate. To qualify, the individual must meet the 150 km condition before the start of their Ph.D.

2. Expertise and Salary requirements

With the 30% ruling, the Dutch tax authorities aim to stimulate the inflow of skilled immigrants.
Having said that, this tax exemption should solely be granted to immigrants who pose an expertise which is scarce in the Dutch labor market. However, the tax office has no particular list depicting the careers or fields of work categorized as skilled work. Rather they make this judgment based on the compensation one will receive being employed in the Dutch labor market.

As per 2018, an employee is obliged to receive a minimum of € 37,296 taxable salary per year in order to be entitled to the 30% ruling. If the employee is granted the right to the ruling they have a tax free allowance of up to € 15,984.
For those under the age of 30 who have obtained a masters degree equivalent to that of the Dutch education system, there is a lower threshold for the ruling. As per 2018, all immigrants under 30 have to receive a minimum of € 28,350 taxable salary per year. With tax-free allowance extending up to € 12,150 per year.
An important exception takes place for those who reside in the Netherlands and conduct scientific research for a designated research institution. As their expertise is apparent no minimum salary applies in order to obtain the ruling.

3. The term of the 30% ruling

The term of your ruling will be shortened if you lived or worked in the Netherlands in the past 25 years prior to your employment.
Visiting the Netherlands for a business trip up to 20 days per year will not result in any deductions. In addition, private stay up to 6 weeks per year or a one-time 3-month stay, will not be considered as a deductible from your term.
Per 2018 the 30% ruling is valid for 8 years.
However, it is important to note that currently there are government plans for this period to be shortened.
Based on a letter published by the government, they are looking to shorten this period both for new applicants as well as for existing rulings. The main question being raised relates to the impact on expatriates already benefiting from the ruling. It is unjust to change the rules for existing rulings just like that.

In the past, there has already been a similar decision shortening this period from 10 to 8 years. Nevertheless, the changes were subtle and considerate of those who were being affected.

Either way, none of these discussions are concrete or final. There is a possibility that this plan will not go through. The draft law should be publicly available by the end of September 2018, and a decision will be made before the end of the year.

Nonetheless, we encourage you to sign the following petitions.

ICAP NL: http://icapnl.com/current-survey/
Expats United: https://www.change.org/p/dutch-government-should-not-break-existing-contracts-keep-the-trust-with-expats

4. Changing employment and the 30% ruling

Were you previously entitled to the 30% ruling, and currently changing jobs? No need to worry, with the basic collaboration of your new employer you can easily obtain the ruling under your new company. The procedure is straightforward and will not lead to any undesired consequences.

Start your own business with the 30% ruling in the Netherlands

If you seek to start a business in the Netherlands and are interested to incorporate your own BV or LTD., you should consider contracting yourself as an employee. That way you will still be able to obtain the 30% ruling, and treat yourself to a tax-free allowance.

However, make sure you double check and calculate whether it is worth it setting up a BV or Ltd. in comparison to being a self-employed person (ZZP). ZZPs in The Netherlands are entitled to a wide range of tax advantages as well.

Additional benefits of the 30% ruling

There are several other benefits that an expatriate can obtain once granted the 30% ruling:
For details in relation to :
Partial Non-Resident Status
American Residents or green card holder
Pension, unemployment benefits and health care benefits

What’s more, here you can find a detailed explanation of the 30% ruling & additional benefits.

Author: Filip Bonev (Business Consultant)
Dutchtaxadvice.nl