Guide to the 30% Ruling in the Netherlands (2024) • NordicHQ (2024)

The Netherlands has long been an attractive destination for highly skilled foreign workers, thanks in part to the 30% ruling. This tax advantage scheme, designed to compensate for the extra costs of living abroad, can significantly reduce your tax burden. In 2024, while still beneficial, the ruling has undergone some changes. This guide will provide an in-depth look at the 30% ruling, with a particular focus on how foreign entrepreneurs can leverage this ruling when setting up their own Dutch BV (private limited company).

What is the 30% Ruling?

Officially known as the “30% facility for incoming employees,” this tax benefit allows employers to provide a tax-free reimbursem*nt to employees coming from abroad to work in the Netherlands. The ruling has two main components:

1. Employers can give a tax-free refund for expenses the employee incurred in making the transfer to the Netherlands.
2. More significantly, employers can provide 30% of the employee’s wage (including the reimbursem*nt) completely tax-free, without needing to prove that these costs were actually incurred.

Both the employer and employee must submit an application to qualify for this facility.

Changes in 2024

1. Step-by-step reduction
   The tax-free percentage will now decrease over time:

• First 20 months: 30% tax-free
• Next 20 months: 20% tax-free
• Final 20 months: 10% tax-free

1. Salary cap
   The ruling now applies to a maximum salary of €233,000 (2024 figure), with a tax-free allowance capped at €69,900.
2. Duration
   The maximum duration remains 5 years, but this includes any previous periods of stay or work in the Netherlands during the last 25 years.
3. Partial foreign tax liability
   From January 1, 2025, employees using the 30% ruling can no longer apply for partial foreign tax liability in their income tax return. This means they will have to file their taxable income from substantial interest (box 2) and savings and investments (box 3) in the Netherlands.

Eligibility Criteria 30%-Ruling

To qualify for the 30% ruling in 2024, you must meet the following criteria:

1. Employment relationship
   You must have an employment relationship with a Dutch employer.
2. Recruitment from abroad
   You must be recruited from outside the Netherlands by your first Dutch employer, or you are on assignment in the Netherlands from another country.
3. Distance requirement
   Of the 2 years before your first working day in the Netherlands, you must have lived outside the Netherlands for more than 16 months, at a distance of more than 150 kilometres from the Dutch border.
4. Specific expertise
   You must possess specific expertise that is not or is only barely available on the Dutch employment market. This is usually determined by meeting the salary threshold:
   • €46,107 in 2024 for most employees
   • €35,048 in 2024 for employees under 30 with a master’s degree
   • No minimum for scientific researchers or doctors in training
5. Valid decision: You must have a valid decision from the Dutch Tax and Customs Administration.

Business Structure and the 30% Ruling

The type of business structure you choose can affect your eligibility for the 30% ruling:

• Eenmanszaak (Sole Proprietorship): As a sole proprietor, you are not eligible for the 30% ruling. This is because the ruling is designed for employees, and as a sole proprietor, you are technically not an employee. All income in the sole proprietorship is taxed as personal income with a relatively high tax burden. Because of the various tax breaks designed for the sole proprietorship, this structure is usually still preferable over the BV with a 30%-ruling if you make roughly under EUR 70,000 and it is not likely that income will grow.
• BV (Private Limited Company): It is possible to qualify for the 30% ruling as a director/employee of your own BV. However, the BV typically needs to be established before your arrival in the Netherlands.

The BV + 30% Ruling Strategy for Entrepreneurs

As a foreign entrepreneur, you can set up your own Dutch BV and then employ yourself, potentially qualifying for the 30% ruling. Here’s a detailed step-by-step guide:

1. Set up your Dutch BV from abroad
   • Find a business address in the Netherlands
   • Register your BV remotely
2. Create an employment agreement
   • Draft a 30% ruling labor contract before moving to the Netherlands
   • Include all relevant clauses for the 30% ruling
   • Consider additional perks like relocation cost compensation and children’s schooling cost compensation
3. Relocate to the Netherlands
   • Only move after completing steps 1 and 2
   • Remember that relocation costs can be expensed in your BV
4. Obtain your BSN number
   • Register at the Dutch municipality to get your BSN (citizen service number)
   • EU citizens can register as citizens of the union
   • Non-EU citizens may need to complete a visa application procedure
5. Start the 30% ruling application process
   • Use your BSN number, signed labor contract, and proof of foreign address
   • The application typically takes 4-6 weeks to process
6. Begin business operations
   • Sign contracts on behalf of your BV
   • Obtain a VAT number for invoicing
   • Set up a business bank account
7. Activate your wage tax number for payroll
8. Apply the 30% ruling to your salary
   • You can apply the ruling retroactively from the start of your labor contract
   • Work with your accountant to ensure correct application
9. Calculate your expected net salary – see next paragraph

Calculating your 30% ruling salary

To calculate the preferred salary for your 30% ruling, you should first see if you meet the threshold. This scenario is based on a single BV with a consultant without many expenses other than the director’s salary.

Calculate if you meet the threshold

The threshold is roughly €66,000 in salary income. If you have less, you are usually better off with a sole proprietorship.

In the first year you will typically have at least €4000-5000,- in expenses (setup costs, accounting etc.), so this means that you will need at least +/- €70,000 in annual revenue in the BV. Minus expenses (including your salary), you will be left with 0 profit in the BV, meaning you will not need to pay corporate income tax (19%).

So, if you have a gross income (salary) from the BV of over +/- €65,000 you can continue with the BV. To calculate what you should pay out as salary you would typically take your gross salary and deduct 30%. The amount that is left is your gross salary that you would pay income tax over.

Example calculation with a €66,000 gross income

Example calculation with a €100,000 gross income

This comparative table clearly demonstrates the potential financial benefit of the 30% ruling for eligible employees at a higher income level.

Please note that these calculations are purely indicative and serve as a general illustration of the potential impact of the 30% ruling. In practice, the actual financial benefit may vary significantly due to numerous factors, including but not limited to individual tax circ*mstances, specific income brackets, changes in tax laws, personal deductions, and the particular implementation of the 30% ruling in each case. It’s always recommended to consult with a qualified tax advisor for a precise calculation based on your specific situation.

Application Process and Timing

The timing of your application is crucial:

• You can apply for the 30% ruling if the employment contract was signed before the employee began residing in the Netherlands.
• For example, if an employee signed a contract on April 1 and started living in the Netherlands on April 15, the 30% ruling application would be legitimate.
• However, moving to the Netherlands, then signing the contract, and then applying for the arrangement is not allowed.

Key steps in the application process:

1. Gather necessary documents (employment contract, proof of residence abroad, etc.)
2. Complete the application form
3. Submit the application within four months of starting work in the Netherlands
4. Wait for the decision (usually 4-6 weeks)

While you can apply for the 30% ruling yourself using the official application form, it’s often beneficial to outsource this process to a tax advisor or specialized service. The application can be complex, and mistakes can lead to rejection.

Extraterritorial Costs

Under the 30% ruling, certain costs are considered extraterritorial and can be reimbursed tax-free. These include:

• Extra cost of living due to higher prices in the Netherlands
• Costs for a familiarization trip to the Netherlands
• Fees for official personal documents
• Costs for medical examinations and vaccinations
• Double housing costs
• Initial housing costs (excess over 18% of wages)
• Storage costs for personal belongings
• Travel costs to home country
• Additional costs for tax return preparation (up to €1,000)
• Language training costs
• Additional call charges for contacting home country

30% Ruling and DAFT: A Winning Combination for Americans

For American entrepreneurs, the combination of the Dutch-American Friendship Treaty (DAFT) and the 30% ruling can be particularly attractive. DAFT allows American citizens to easily obtain a residence permit for self-employment in the Netherlands, while the 30% ruling provides significant tax benefits.

Here’s how it works:

1. Use DAFT to obtain your residence permit and set up your Dutch business.
2. Structure your business as a BV and employ yourself.
3. Apply for the 30% ruling as a highly skilled migrant employed by your own BV.

This combination offers a streamlined path to both living and working in the Netherlands while enjoying substantial tax benefits. You can read more about the requirements, timeline and fees in our guide on DAFT.

How do you move forward?

The 30% ruling remains a valuable tool for attracting international talent to the Netherlands, including entrepreneurs setting up their own businesses. While the rules have changed somewhat for 2024, with proper planning and execution, it can still offer significant financial benefits.

If you would like to get an offer for the 30% ruling company as an entrepreneur or consultant, please contact us below.

Contact us