30% Allowance ruling
Outline of the 30% Allowance ruling
The 30% allowance ruling is a special tax facility for employees who are hired or seconded from abroad and who have specific expertise that is scarcely available on the Dutch labor market. The 30% allowance ruling grants the employee a tax free allowance of 30% of his taxable salary to compensate "extraterritorial costs". These are the additional costs relating to their stay or employment outside their country of origin. Employer and employee must agree in writing in (an annex to) the employment contract that the employee’s taxable salary will be reduced to 70% of the agreed salary, and that instead the employee receives a tax free allowance of 30% of his taxable salary.
Application
Deemed non-resident status
Residents of the Netherlands are subject to Dutch taxation on their world wide income from employment and home ownership (Box 1), income from substantial equity interest (Box 2) and income from savings and investments (Box 3). Under the 30% allowance ruling employees can however opt for the deemed non-resident status. If they do so, in the Netherlands, they are only taxable on their world wide income in Box 1. For Box 2 and 3 they are deemed non-resident tax payers.
In practice for most employees this means that they are not subject to taxation in the Netherlands
for their balance in bank and savings accounts, and for the value of investments such as stock and bonds.
New employment
However, no more than three months should have lapsed between the termination of the previous employment and the acceptance of the new job. The ruling can be continued with the new employer without duration loss, if the extension is applied for within 4 months after the first day of work.
Condition
The possession of scarce specific expertise is determined on three criteria: education, salary and professional experience. However in case of an international group transfer ("job rotation"), the employee is deemed to qualify for the ruling if he is in middle or higher management, and has worked with the group company for at least 2½ years.
Duration
Deemed non-resident status
Residents of the Netherlands are subject to Dutch taxation on their world wide income from employment and home ownership (Box 1), income from substantial equity interest (Box 2) and income from savings and investments (Box 3). Under the 30% allowance ruling employees can however opt for the deemed non-resident status. If they do so, in the Netherlands, they are only taxable on their world wide income in Box 1. For Box 2 and 3 they are deemed non-resident tax payers.
In practice for most employees this means that they are not subject to taxation in the Netherlands
for their balance in bank and savings accounts, and for the value of investments such as stock and bonds.
Additional
This ruling has certain consequences in terms of pension and social security; employees who take advantage of the 30% rule can only accumulate pension on the remaining part of their salary. If the rule is approved after determining the annual salary ABP (general civil pension fund), in January of each year or the month of starting the job, the annual salary for that year will remain unaffected. Social security will be affected. The Werkloosheidswet or WW (Unemployment Insurance Act) premium which is deducted from the employee's salary may change, which means that a lower payment would be made in case of unemployment and/or inability to work.
Source: Holland Gateway
Changes in 30% rulling 2011 in Dutch.pdf
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