The Netherlands, which stands out with its inviting policies towards highly skilled migrants, offers tax advantages to employees who want to start a new life in the country with its 30% Ruling. Employers can also reduce their salary costs with this tax incentive. As Unusual Payroll, a trusted Payroll and Employer Services provider, we discuss the details of the 30% Ruling in this blog.
One of the most curious issues regarding the Netherlands, which runs special incentive programs to employ highly skilled migrants in its country and strengthen the workforce potential, stands out as the 30% Ruling. As a trusted Payroll and Employer Solutions provider, Unusual Payroll, in this blog, we will examine in depth this ruling, which provides significant cost savings and net income increase to employers, employees and those who own their own business in the Netherlands. We will focus on the details of the Dutch 30% Ruling and summarise the benefits of this Ruling for highly skilled migrants.
According to Statista data, as of September 2023, the employed workforce of the Netherlands is measured at around 9.72 million people. The European Commission estimates reveal that 38% of the Dutch workforce has secondary education, and 41% has higher education. The Netherlands, which ranks fourth in the working culture and satisfaction subcategory of the Working Abroad Index, stands out as a desired destination for highly skilled migrants as it offers better career options and work-life balance opportunities. The Dutch government runs various incentive programs to attract qualified workforce to its country. The 30% Ruling is one of these programs…
What is the 30% Ruling?
The 30% Ruling in the Netherlands is a tax advantage program designed to attract highly skilled migrants by allowing them to receive a tax-free reimbursement of up to 30% of their gross salary, reducing their taxable income. To be eligible, individuals must meet specific criteria, including having specialised skills and not living within 150 kilometres of the Dutch border before starting work in the Netherlands.
The 30% Ruling Conditions: Who can benefit from the 30% Ruling and how?
Anyone moving to the Netherlands for work can benefit from the 30% Ruling, provided they meet certain conditions. The Dutch government data shows that four out of five foreign employees benefit from it. The requirements that employment must meet to benefit from the 30% Ruling established within the scope of the Dutch Wage Tax Law of 1964 are as follows:
The employee who wants to benefit from the 30% Ruling relocates to the Netherlands from abroad and is employed,
Works for an employer who is registered with the tax office in the Netherlands and pays Dutch payroll tax,
An agreement has been reached between the employer and the employee on the 30% Ruling,
The employee must have lived 150 kilometres or more from the Dutch border for more than 16 months in the 24 months before their first day of work in the Netherlands.
Additionally, the employee is expected to have expertise that is rare or in high demand in the Dutch labour market. Whether the employee meets this condition is determined according to the following criteria:
If the tax-free salary is more than € 41,954 per year as of 2023.
Persons under 30 years of age with a Dutch academic master's degree or an equivalent title in another country if their salary is more than €31,891 per year by 2023.
Anyone who conducts scientific research conducts research in a designated facility or is a physician trained to become a specialist is deemed to meet this requirement, regardless of their salary.
Advantages of the Dutch 30% Ruling for highly skilled migrants
For highly skilled migrant employees, being subject to income tax only on 70% of their gross salary means an increase in net income and a higher salary after tax for employees. Employees who can use this increase to build a life with a high level of prosperity can also implement their Investment and retirement planning more easily. The advantages of the 30% Ruling for highly skilled migrants working in the Netherlands can be summarised as follows:
Partial non-resident taxpayer: While a foreign employee typically qualifies as a Dutch taxpayer under Dutch tax law, those who benefit from the 30% Ruling are treated as non-resident taxpayers. In this way, these individuals are taxed only on part of their income (Box II) and the income they receive from their savings and investments (Box III). For details of the Dutch tax system, this article may be helpful.
Ease of gaining a Dutch driver’s license: Citizens of countries outside the European Union who do not benefit from the 30% Ruling can only use their driver's license in the Netherlands for 6 months, and after 6 months, they have to get a driver's license in the Netherlands again. 30% Ruling exempts employees from this situation by allowing them to exchange their driver’s license for a Dutch driver's license without taking any driving or theory tests.
Education expenses: The employer can cover international primary or secondary school fees for children of highly skilled migrant employees moving to the Netherlands.
All these advantages accelerate the adaptation of highly skilled migrants who relocate to the Netherlands to work and increase their welfare.
Benefits of the Dutch 30% Ruling for Employers
Employing highly skilled migrants is also advantageous for Dutch-based businesses, thanks to the 30% Ruling. By taking advantage of the 30% Ruling, companies may pay less employee payroll tax and reduce salary costs. It provides easier access to qualified employees from abroad, and the 30% Ruling offers insurance contributions to the employer.
Take advantage of the 30% Ruling with the comprehensive Payroll Services from Unusual Payroll
As Unusual Payroll adds value to your business with Payroll and Employer Services, we ensure you can fully benefit from the 30% Ruling. We stand by your business with our international team, our knowledge of Dutch tax and labour laws, and our comprehensive Payroll Services. Contact us today to start the Payroll process and begin your Netherlands journey!
