The Dutch 30% facility for expats

13 April 2016

The Netherlands is internationally known for its 30% tax ruling, also known as the 30% facility. This benefits expats (foreign employees) working in the Netherlands by reducing the taxable wage costs regarding the individual employee. If an expatriate meets certain conditions, the employer may reimburse his extraterritorial expenses free of tax, without providing evidence of any expenses incurred. The employee may receive a fixed cost-allowance from his employer, amounting to 30% of the sum of the total wage costs.

Extraterritorial expenses incurring from working temporarily in the Netherlands can relate to:

  • home leave;
  • housing;
  • travelling to the country of origin for family visits;
  • medical examination and vaccination;
  • tax advisory;
  • language courses;
  • finding a school for the children.

To apply for the 30% ruling, the employer and employee need to send a joint request to the Dutch Tax Administration. The joint request should be submitted within four months after the first working day of the employee. Applying for the 30% ruling after these four months is still possible. However the duration of the 30% ruling will be reduced with the period of residence in the Netherlands before the application.

As from 1st January 2012 the legislation concerning the Dutch 30% ruling changed. To apply for the 30% ruling, the employee must meet the following requirements at all times:

  • the employee’s salary, exclusive of the 30% fixed-cost allowance, is higher than € 35.000 (or € 26.605 for employees in academic education or academic/medical research);
  • the employee lived at least 150 kilometres away from the Netherlands, 2 years prior to the employment in the Netherlands, for at least two third of the time.

The following factors can also be taken into account during the application:

  • the employee’s level of education;
  • the employee's relevant experience;
  • the remuneration level of the position in the Netherlands in relation to the remuneration level in the employee's country of origin.

Example
An expatriate is granted a 30% ruling by the Dutch Tax Administration. His gross salary exclusive of the 30% ruling reimbursement amounts to € 40.000. The employee may receive a tax-free 30% facility reimbursement of 30/70 x 40.000 = € 17.143 on top of the gross salary of € 40.000.

Employees who are granted the 30% facility may opt for a partial non-resident tax liability. They will only be considered as a resident taxpayer for Box 1, meaning they will have to pay income tax on salary. For Box 2 and 3 they are viewed upon as non-residents, meaning they are only tax liable for substantial business interests (shareholding) or real estate located in the Netherlands.

Applying for the 30% ruling can lead to considerable financial benefits. Permission of the Dutch Tax Administration is required for the application of the facility. The above summary describes the key features of the 30% ruling.

Do you have any questions? Please contact us by filling out the contact form. One of our English speaking consultants will contact you at short notice.

Date: April 18th 2012