Majority of expats in Netherlands have heard about the 30 percent tax ruling at some point or the other. But not many of them know exactly what it is and how one can fully reap the benefits of this advantageous ruling.
Here is my humble attempt to decipher the 30 percent ruling for the expats -
What is the 30 percent tax ruling?
This is a special kind of a tax advantage provided to the expats living in Netherlands, provided to them so as to attract highly skilled individuals from foreign countries possesing skills and knowledge that is scarce in the Dutch society.
Under this ruling, 30 percent of the employee's salary is paid to him/her tax free thus helping in the reimbursement of expatriate costs also known as the extra territorial costs.
There are certain conditions that have to be met by the expats if they are to take advantage of this ruling. These conditions are as below:-
- The employee has to be recruited from a foreign country by the employer. An expat already living in Netherlands who has found a job in the Dutch society is not eligible for this ruling.
- He/she must possess specific skills and knowledge that are rarely available in Netherlands.
- The employer has to make sure that those skills are not already available in Netherlands. Further, the employer has to prove that he didnot succeed in finding such skills here, like for example, by giving a related ad in the newspaper.
If all these conditions are met, the employer and the employee should then together apply for the 30 percent ruling with the Belastingdienst (the Dutch tax authority). This request has to be filed within four months of an employee taking up the position in Netherlands. If not done within four months, the ruling might still be granted but then the tax rebate will be applied only from the month after which the application was filed.
Benefits of the rule -
- The most important benefit that one enjoys with this ruling is the 30 percent tax break advantage on the salary. This means that 30 percent of one's salary is not taxed at all. The remaining 70 percent of the salary will be taxed in the normal way.
- Another exciting offshoot of this rule is that one can exchange his/her foreign driving license for the Dutch driving license without undergoing any kind of driving test/exam. This benefit appeals a lot to the expats since the Dutch driving test is very very difficult and expensive too. So, if you fall under the 30 percent ruling, simply exchange your foreign license for the Dutch one and off you go on a long drive..!!!
- One can also opt for a "partial non resident status" under this rule. This means that one is considered to be a non resident income tax payer with regards to income on investments and savings arising from outside of Netherlands. Hence one does not have to pay taxes on any such income in Netherlands.
Well then, what are you waiting for..Go ahead and apply for the 30 percent ruling if you havent done that already..:-)
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