Both employers and employees benefit from a good understanding of the tax benefits for expats. The 30% ruling is an essential tax benefit. This article will explain the basics of the ruling and will provide clarity on the amendments of this ruling.
What is the 30% ruling?
The 30% ruling is a tax benefit that applies to expats who have an employment relationship being executed in The Netherlands. The ruling accommodates a threshold that is excepted from taxation by income tax. That means that the first 30% of your salary will not be taxed at all. The remaining 70% will be taxed. Given the taxation of income by brackets, this ruling will provide a considerable advantage for expats.
What are the conditions to get the 30% ruling applied?
Given the impressive tax advantage, it is very well imaginable that the Dutch legislator build in some criteria that need to be met. The first one is that the employment contract was obtained whilst living abroad. The job application needs to have been executed from abroad. The second criterium demands a certain expertise, that is expressed in the salary amount. The remaining taxable incoming above the 30% threshold needs to be at least € 41.954,00 (standard of 2023). If you are a qualified scientist or doctor, the second criterium does not apply. The third requirement is that you lived abroad at least 16 out of 24 months prior to the starting date of your employment contract. Abroad is defined as any location outside the 150 kilometre zone from the Dutch borders.
What is the term for 30% ruling?
This tax benefit is granted for five years.
Savings and investments
Salary or income is taxed in the so-called Box 1 of the income tax. The 30% ruling gets deducted from your Box 1 taxation. There is another benefit of importance: If the 30% ruling applies to your situation, you get excepted from any taxation in Box 3 as well. Box 3 covers Savings and Investments. Your savings and investments will not be taxed. There are specific requirements for the application of this benefit in Box 3. The amount of savings that is excluded from taxation is maximized at € 57.000,00 (standard of 2023). If you have a partner, that amount is doubled. Savings can be freely allocated between partners.
Amendments in the 30% ruling
From the 1st of January 2024, an Act amending the 30% ruling has come into effect. This Act alters the benefits of the 30% ruling. Before the amendment, you could get a 30% threshold benefit for the duration of five years. After the amendment, a tier system applies. You will receive a benefit of 30% for the first twenty months from the start of the employment contract. The successive twenty months will grant you a benefit of 20%. The remaining twenty months will give you an advantage of 10%.
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