30 Percent Ruling

The favourable 30% ruling (or in Dutch "30%-regeling") allows expatriate employees who work in The Netherlands to earn up to 30% of their compensation tax free.

In addition, the 30% ruling allows you, the expat, to opt for the partial non-residency status. With the partial non-residency status you are exempt from Dutch taxation on your investments (except for investments in Dutch real estate). US nationals with the partial non-residency status can also claim a deduction for employment income allocated to their non-Dutch workdays.

Finally, with the 30% ruling you and your partner are allowed to exchange your foreign driver's license for a Dutch driver's license without having to take time-consuming tests.

Because of these benefits, the 30% ruling is generally considered to be the single most essential part of prudent tax and financial planning for employers and expats coming to work for them in the Netherlands. The application and the implementation of the ruling should therefore not be taken lightly.

Ensuring that you have a knowledgeable party assisting you is therefore not a luxury. OnestopTax BV is specialised in obtaining and implementing the ruling and assists both employees and employers in the entire process. This includes:

• Review of and planning towards qualifying for the 30% ruling
• Applying for the 30% ruling
• Implementation of the 30% ruling in compensation packages
• Personal Service
• Competitive and transparent fees

Steps:
The employer and the employee need to contractually agree on the 30% ruling in the contract of employment;
The employer and the employee gather the information and documents required for the filing of the application for the 30% ruling;
The application is filed with the Dutch tax authorities (needs to be done within 4 months of first arrival in the Netherlands);
The Dutch tax authorities will make a formal descision on the application within 6-12 weeks;
Once granted, the 30% ruling needs to be implemented in the salary administration to effectuate the benefit.

Addendum to contract of employment
The employment contract should be updated to include an article agreeing on the 30%-ruling applicatio, payroll implementation and agree that the minimum taxable salary is met. If the contract has already been signed, then the 30%-ruling article can be stated on a separate letter that can be attached to the existing contract as an addendum.

Information needed for the 30%-ruling application

• full details of the employer including company address and Dutch wage tax number;
• full details of the employee, including address;
• the Dutch tax number so-called burgerservicenummer (BSN ;
• copy passport of the employee;
• a copy of the residence permit and work permit (if applicable);
• the curriculum vitae of the employee;
• a copy of the employment contract, including the 30%-ruling agreement/addendum;
• a power of attorney signed and dated by a representative of the employer;
• a power of attorney signed and dated by the employee;
• proof of the employee's residency abroad for each month in the 2 years prior the the employment start in the Netherlands.

Filing timeline for the 30% ruling.

General
If granted, the 30% ruling will be effective as of the first of the month following application. For example:

• If the application is filed on November 23,  the ruling is effective as of December 1st.
• If the application is filed on April 1, the ruling is effective as of May 1st.

4-month exception
An exception to the general rule is that if the application is filed within 4 months after the start of the employment in  the Netherlands, the 30% ruling will have retroactive effect to the employment start date of the employee. For example:

• The employee starts working in the Netherlands on February 12. The application is filed on May 13 (within the 4-months). If granted, the 30% ruling will be effective as of February 12.
• The employee starts working in the Netherlands on February 1. The application is filed on June 2nd (outside the 4-months). If granted, the 30% ruling will be effective as of July 1.

Formal decision tax authorities on 30% ruling

The Dutch tax authorities will generally review the application within 6 to 12 weeks. They can either approve or deny the 30% ruling or they may request additional information:

Approval
If approved, the 30% can be applied in the Dutch payroll. The benefit will be calculated retroactively (if filed within the 4-months) through the payroll and refunded to you with your regular salary.

Denial
If the 30% ruling is denied, you have the right to file a letter of objection against the decision. This needs to be done within 6 weeks of the decision . The tax authorities will also indicate the grounds for denial. These grounds can be contested in the letter of objection by providing additional information. If the tax authorities also deny the 30% ruling based on the letter of objection, then you can have the matter appealed in court. The appeal needs to be filed within 6 weeks of the second denial.

Conditions

The Dutch tax authorities review every application for the 30% ruling on an individual basis. In this respect the Dutch tax inspector will review the employee’s situation at the time he/she moves to the Netherlands to determine eligibility for the 30% ruling. The employee will need to meet the following 3 criteria in order to be eligible for the 30%-ruling:

1. Employment/ hired from abroad

2. Specific expertise/ salary level

3. Scarcity

1. Employment/ hired from abroad

The ruling is meant to attract foreign employees with specific expertise to the Netherlands. In that respect, the expatriate must be living outside the Netherlands when hired or assigned to work in the Netherlands.

If the expatriate moves to the Netherlands and is hired after already having moved to the Netherlands, then the expatriate is considered to be hired locally and may fail the employment test. The expatriate will then need to strongly argue that he/she moved to the Netherlands for employment reasons only. Having signed a definite employment offer before moving to the Netherlands / registered at the Dutch municipal system can be used as an argument to this extent.

Please note that the employee is not considered to be hired from abroad if he/she was living in the foreign border region (within a radius of 150 kilometre from the Dutch borders) for more than 8 months in the 2 years prior to the employment start in the Netherlands.

2. Specific expertise/ salary level

The Expat Scheme (30%-facility) is meant to attract employees with a specific expertise that is scarce on the Dutch labour market. Whether or not an employee possesses a specific expertise that is scarce on the Dutch labour market depends on their taxable income.

An employee is deemed to have a specific expertise if their taxable income is more than € 46.660 (2025) excluding the maximum 30% tax-free reimbursement. The taxable income refers to the employee’s salary that is subject to tax, excluding any tax-free reimbursements. This means that the taxable income should be at least € 66.658 including the maximum 30% tax-free reimbursement.

For employees below the age of 30 and in possession of a Dutch master’s degree or a foreign master’s degree that meets the Dutch standards, there is a reduced minimum taxable income requirement of € 35.468 (2025) excluding the maximum 30% tax-free reimbursement, and € 50.669 including the maximum 30% tax-free reimbursement. When reaching the age of 30, these employees will need to meet the general minimum taxable income requirement of € 46.660 (2025), in order to remain entitled to the 30%-facility.

Employees that are working as a trainee medical specialist or a scientific researcher at an educational institution can be eligible for the 30%-facility without meeting the minimum taxable income requirement.

3. Scarcity test

Finally, upon request the employer must prove that they needed to hire the employee from outside the Netherlands because it was difficult to find an employee with similar qualifications on the Dutch labour market. In this respect there are three conditions which the tax authorities can review in order to determine if specific expertise is scarce on the Dutch labour market, namely:

a. the level of education;

b. the work experience relevant for the position;

c. the salary level compared to the home country.

These conditions may be evaluated independendly by the Dutch tax authorities for the evaluation of the scarcity on the Dutch labour market.

a. Education

Generally, the Dutch tax authorities will consider a business or university degree as a passing requirement. In the absence of such a degree, specific courses or other means can be used to argue education proficiency levels.

b. Experience

As a rule of thumb, the Dutch tax authorities expect the employee to have at least 2.5 years of relevant work experience before he/she can argue to have specific expertise. In this respect, relevant relates to having experience in the same field of work and on a similar level.

c. Salary level compared to home country

The salary level will be evaluated in relation to salary levels in the home country i.e. someone coming from India and earning € 40,000 per annum should be considered as a higher level employee in India.

Contractual agreement
Based on the 30% ruling, the employer will split the employee's agreed compensation package into a tax free allowance equal to (a maximum of) 30% of the agreed package and 70% wages (see the benefit calculated).

To allow this split, it needs to be formalized as part of the employment contract between the employer and the employee. This needs to be worded in such a manner that the initial agreed compensation will be reduced resulting in an initial agreed compensation package equal to 100/70 of the new agreed compensation. In addition, the contract must also include that the employee receives an allowance for extraterritorial costs equal to (a maximum of) 30/70 of the new agreed compensation. If not included in the original employment contract, then this agreement can be made in the form of an addendum to the existing employment contract.

Dutch payroll
The salary of the employee must be subject to Dutch wage tax withholding. The Dutch employer usually is considered a withholding agent for Dutch wage tax purposes.

The employer should only process the 30% ruling in the payroll once the 30% ruling is granted by the tax department. The Dutch tax authorities may decide on the request within 2 months after filing. The 30% ruling can in principle be applied with retroactive effect if the application for the 30% ruling has been filed within 4 months after the start of employment.

If the 30% ruling is granted in a new tax year and the salary administration of the previous tax year has been closed, the 30% tax free allowance can be paid out in the following tax year. Alternatively, the 30%-benefit of the first year can be claimed in the income tax return of the employee.

Exchange with the 30% ruling

A side benefit to the 30% ruling is that you are allowed to exchange your foreign driver's license for a Dutch driver's license without having to take a test, irrespective of the country in which the license was issued.

Before we explain the procedure on how to exchange the foreign-issued driver's license we will explain when a holder of a foreign-issued driver's license needs to obtain a valid Dutch driver's license. It is decisive in which country the original driver's license was issued.

EU/EEA member states

Holders of a driver's license that was issued in one of the EU/EEA member states may use this license in the Netherlands during a maximum period of 10 years, unless it expires at an earlier date. After this period, the license must be exchanged.

Non-EU/EEA countries

Holders of driver's licenses issued in non-EU/EEA countries may continue to use their foreign-issued licenses during a maximum period of 185 days after becoming a resident in the Netherlands. After this period, the foreign-issued driver's license is no longer valid in the Netherlands.

Procedure

Exchange of a foreign issued driver's license is only possible if the license was issued in one of the EU/EEA member states or in Aruba or the Dutch Antilles except for employees who are entitled to the 30% ruling.

Applications for exchanging foreign-issued driver's licences have to be addressed to the local municipality. The following documents must be submitted:

• the original foreign-issued driver's license
• a birth certificate or a certificate of residence from the municipality
• two identical, recent passport photographs.

Employees who exchange their driver's license with the 30% tax ruling also need to submit:

• a copy of the ruling issued by the Foreign Tax Department
• and a statement of capability which can be requested at the local municipality through an application form.

Regular driving test

If it is not possible to exchange a foreign-issued driver's license into a Dutch license, the regular Dutch driving test must be taken. The Dutch driving test consist of a theory exam and a practical test.

Change of employer
Should an expat change employment during the term, the 30% ruling can be transferred to the new employer for the remainder of the term with ajoint request of the employee and the new employer. Provided that the period between the end of employment with the former employer and the realization of the employment contract with the new employer does not exceed 3 months.

Please note that the tax authorities are allowed to test the scarcity of the specific expertise of the employee required for the new occupation/ function on the Dutch labour market but in practice this is rarely applied.

The 30% ruling consist of a tax-free allowance of (a maximum of) 30% of the taxable salary of the employee. The 30% tax-free amount is considered to cover extraterritorial expenses, or "ET costs" regardless of the actual costs incurred.

ET costs are costs that an employee would not have incurred if he/she remained working in his/her home country. Regular business expenses are not to be considered ET costs and can be reimbursed in accordance with Dutch wage tax rules.

The employer can decide to reimburse the real ET costs. This can be done if the costs are higher than the 30% allowance or when the 30% ruling is not granted. Based on the definition of ET costs, it may be difficult to determine which expenses qualify as ET costs. The Dutch Ministry issued a list with costs which are to be considered ET costs under certain conditions and which not.

• Cost of living allowance for the extra/higher costs in the Netherlands; can be reimbursed tax free as extraterritorial costs
• Foreign service premium/expat allowance/overseas allowance: will be taxed as normal salary
• Relocation expenses/ moving allowance: tax free up to a certain level under the normal rules
• Househunting/ acquaintance trip: can be reimbursed tax free as normal costs or as extraterritorial costs depending
• Cost for permits: costs for residence permit application can be reimbursed tax free as extra territorial costs, costs for work permits can be reimbursed tax free as normal labour costs
• Storage expenses: if the furniture will be moved to the Netherlands then these costs fall under the normal rules for the labour costs otherwise they can be reimbursed as extraterritorial costs
• Reimbursement for losses (for example on sale or property or car) will be taxed as normal salary
• Free accommodation/ housing: if a property is kept in the home country then the extra cost in the Netherlands can be reimbursed as extraterritorial cost, otherwise it will be taxed as normal salary but under specific rules
• Reimbursement for expenses for the purchase of a home/brokers fee: will be taxed as normal salary
• Utilities: it may be possible to determine these costs as extraterritorial expenses
• Home leave/ travel costs: travel costs for travel between The Netherlands and the home country are treated as extraterritorial costs
• Cost of a tax advisor: costs of Dutch tax preparation can be reimbursed as extraterritorial costs
• Tax-equalization: will be taxed as normal salary
• Language courses: can be reimbursed tax free as extraterritorial costs
• Telephone costs: tax free up to a certain level under the normal rules; the part which sees to the extra costs for phone calls to the home country can be determined as extraterritorial costs
• Food: tax free up to a certain level under the normal rules.

Benefit Calculated
When granted, the employer is allowed to pay a maximum of 30% of the agreed compensation package to the employee as a tax free allowance for up to 5 years. This benefit can be calculated as follows:

Example:

Partial non-residency

Partial non-resident taxpayer:

Until December 31st, 2024 employees with the 30% ruling can choose to be treated as a partial non-resident taxpayer when filing their Dutch income tax return, despite living in the Netherlands. As a partial non-resident, the employee is in principle only subject to taxation in the Netherlands on Dutch sources of income. Dutch sources can be considered employment income, income derived from Dutch real estate property, or from a substantial share hold in a Dutch company. Consequently this partial non-resident tax status may result in a tax saving compared to Dutch tax residents as personal income from non-Dutch sources is not subject to Dutch income tax.

As of January 1st, 2025 this special status ceases to exist for employees with the 30%-ruling that started working in the Netherlands from January 1st, 2024 onward. This means that employees with the 30%-ruling will be considered Dutch tax residents and are required to report their worldwide income in the Netherlands in their Dutch income tax return.

Transitional Law

A transitional regime applies for employees for whom the 30% ruling was applied to their salary up to and including December 31st, 2023. This group of employees can still elect to be considered partial non-resident taxpayer up to and including December 31st, 2026.

5 years

The 30%-ruling can be granted for a maximum period of 5 years. This 5-year period is in principle reduced by any period of previous stay or employment in the Netherlands within the 25 years prior to the start of the employment in the Netherlands. Periods of previous stay or employment that started prior to these 25 years and ended within the 25 year-period will also be deducted from the maximum 5-year period for which the 30%-ruling can be granted:

For the application of this rule, certain periods of stay or work during the preceding 25 years are neglected, if in every calendar year of the period of 25 years, the expat:

• did not work in the Netherlands for more than 20 days per year;
• did not stay in the Netherlands for a total of more than 6 weeks for holiday, family visit or other personal circumstances per year;
• is allowed a one-off period of 3 consecutive months of stay in the Netherlands for holiday, family visit or other personal circumstances for the entire 25 years.

For the lookback period, every period of reduction is rounded up to whole months. E.g. For spending 1 week in the Netherlands, one month will in principle be deducted from the 5-year period.

Please note that entitlement to the 30%-ruling ends at the moment that an expat no longer has specific expertise which is scarce/unavailable on the Dutch labour market. This means that if an employee does not meet the minim