Taxation in The Netherlands under the 30% tax rule
Foreign employees hired by a Dutch employer can be entitled to the so called 30% tax ruling. This means that 30% of the gross income is being paid without any taxes withheld on that part. This is results in a much higher nett spendable income.
The employee needs to meet one of the following criteria:
- Students with their PhD who must earn at least €26,605 a year and have to be under the age of 30. This is also applicable if the PhD was done on a Dutch University and finding a job in Holland right after graduating.
- Any other employee, hired from abroad, must have an agreed salary of at least €50,000 a year. This salary is then split into a taxable part (70%) and a non taxable part(30%).
- Overall the employee must have experience in an area of expertise which is scarse on the Dutch labor market.
- People hired from within a 150km radius of the Dutch border are not entitled to the 30% ruling.
- There is a 25 year look back period. This means that all periods of residence or work in The Netherlands ending in the previous 25 years are deducted from the maximum 8 years period the ruling can be valid. This means for most Dutch nationals that they will not qualify for the ruling.
The application for the 30% rule must be made within 4 months after starting in the job. If the application is made after the four months period the ruling can only be granted from the next month after the appliaction. This longer period is then deducted from the maximum period of 8 years.
During the 8 years period the Revenue Service is entitled to check if the employee still meets the criteria of the ruling. If not then the ruling is ended.
Employees working in the Netherlands under the 30%-ruling are entitled to the following tax advantages:
1. approximately 30% of their gross salary is paid as a tax-free '30%-cost reimbursement';
2. for other income elements than salary, they can choose for the so-called partial taxation.
3. Capital gains (e.g. on the sale of a real estate or shares) are not taxable in the Netherlands.
The taxation on Item 2. depends on whether the employee is considered a resident tax payer or a non-residents tax payer. In principle:
1. resident tax payers are employees who are living in the Netherlands;
2. non-residents tax payers are employees who are not living in the Netherlands.
Item 1. Resident tax payers.
Practically every resident taxpayer in the 30%-ruling will choose for the so-called partial taxation. This means that only a limited number of income elements are taxed in the Netherlands, like:
a. the salary from Dutch and if applicable also foreign employment (incl. a company car);
b. income from a main residence in the Netherlands. (if your main residence is abroad, you normally are a non-resident.);
On the other hand, they are entitled to deduct extraordinary expenses like medical expenses, major charitable donations and alimony payments. And besides that they have the claim on the general tax credit for their spouse (so-called 'heffingskorting').
Item 2. Non-resident tax payers.
In principle you are considered a non-resident if you and/or your spouse and family are (still) living abroad (outside the Netherlands). Although you have the option to be considered a resident taxpayer. Therefore we will give you some general remarks regarding these 2 different fiscal options:
a) non-residents are not liable for Dutch taxation for foreign working days, holidays and sick days (this means days spent outside the Netherlands). These days are taxable in their home country. The difference in the Dutch and home country tax rates could lead to a tax benefit; or
b) non-residents have the option to be taxed like resident tax payers (partial taxation like in Item 1.). This implies that they loose the opportunity to deduct the foreign days as mentioned earlier
The request for the partial taxation can be made together with the application for the 30%-ruling, but ultimately when the tax return is filed.
* After the calendar year has ended an income tax return needs to be filed. When interested in our services Witlox International Tax Advice can do this for you, for a reasonable price for you (and your partner). You can download our questionnaire from the website www.witlox.info
For more info on the ruling or assistance in filing your tax return you can contact us at
Witlox International Tax Advice
5342 CG Oss
Tel: +31 (0)412 644898
Mob: +31 (0) 6 29135799