Tax incentive in the Netherlands for foreign employees – 30%-ruling

In order to attract foreign companies and their employees to the Netherlands, a beneficial tax regime has been introduced in Dutch tax law: the 30%-ruling.

29 October 2018

In order to attract foreign companies and their employees to the Netherlands, a beneficial tax regime has been introduced in Dutch tax law: the 30%-ruling. By benefiting from this tax incentive, either the tax burden for the employee or the cost for the employer can be reduced. Moreover, the social security cost can be limited if the income does not exceed certain amounts and a tax resident employee can optimize his personal income tax position by choosing the partial non-resident tax status.

What exactly is the 30%-ruling?

The 30%-ruling is a Dutch employment tax law facility and is open to employees who come from abroad to work in the Netherlands and meet specific conditions. As the employee is assumed to incur extra expenses for working outside his home country, his employer may give him a fixed tax-free allowance in view of these “extraterritorial expenses” up to 30% of his wage (the 30%-allowance).

How to apply for the 30% ruling

Employer and employee together must file an application with the Dutch tax office. The tax office will review the situation and grant a formal approval. It is possible to appeal against a negative decision. In order to be allowed to apply the 30%-ruling as of the first working day, the application must be filed within four months as of the start of the employment. If the request is filed too late, the ruling can be applied as of the month following the month in which the application has been filed only.

Conditions of the 30%-ruling

  • The candidate for the 30%-ruling must have the status of employee; statutory and supervisory directors may also qualify, selfemployed persons do not;
  • The employee must be recruited by or seconded to a ‘withholding entity’, i.e. an employer running a Dutch payroll administration, from abroad;
  • The employee must have lived at a distance exceeding 150 km from the Dutch border during 16 out of 24 months prior to the start of the employment in the Netherlands. For PhD graduates an exemption applies;
  • The taxable salary has to exceed a minimum level of € 37,296 (2018) at the start and during the full term of the 30%-ruling. For employees under 30 having a master degree it has to be at least € 28,350 (2018). Specific rules apply for PhD students/graduates;
  • As of 1 January 2019, the maximum period will be reduced from eight to five years. However, for the employees who – due to the proposed change – would lose their 30%-ruling in 2019 or 2020, transitional rules will apply. For them the 30%-ruling can be applied until the end of 2020 in as far as their personal term of duration of the 30%-ruling will not have expired.

Employment contract

In order not to increase the cost for the employer, the contractual gross salary must be reduced with the 30%-allowance. An administrative split into taxable wage and tax-free 30%-allowance can be made in the payroll administration for practical reasons, taking the original gross salary as a basis. The condition is that employer and employee agree in writing that a 30%-allowance will be paid and that the gross salary will therefore be reduced as well as that the consequences of reducing the contractual gross salary will be implemented correctly in the payroll calculations. Such agreement should preferably be laid down in an addendum to the employment contract or secondment contract. The split of the wage into taxable wage and tax-free 30%-allowance is not allowed if parties have not signed such agreement!


  • The basis for the calculation of the 30%-allowance is the taxable wage. The 30%-ruling cannot be applied on termination payments or pensions;
  • Tuition fees for international schools can be reimbursed tax-free in addition to the 30%-allowance. Any other additional allowances for extraterritorial expenses (e.g. double housing expenses, home leave, etc.) cannot be paid tax-free if the 30%-allowance is paid.

Reimbursement actual extraterritorial expenses
If an employee does not satisfy the conditions of the 30%-ruling or the actual exterritorial expenses exceed the fixed amount of 30% of the wage, the actual extraterritorial expenses can be reimbursed tax-free, but in that case evidence will have to be delivered by the employer.

Partial non-resident tax status
If the employee moves to the Netherlands and becomes a resident tax payer he can – if the 30%-ruling has been granted – choose to be treated as a partial non-resident tax payer, his tax liability in the Netherlands thus being limited. He has to report his worldwide income and is entitled to deductibles in box 1, but income from investments (box 3) is not taxable. US citizens have a special status. The changes as of 2019 imply that resident employees running out of the five years-term per 1 January next, will have to report their income from investments (box 3) per 1 January 2019.

Exchange driving licence
Having a 30%-ruling approval, the employee and his family members can easily exchange their foreign driving licence for a Dutch one.


Rina Driece
Loyens & Loeff
Employment Taxes and Employment Law
T +31 10 224 64 24

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