We’ve got a lot of questions about the 30% tax ruling in the Netherlands in the past we’re addressing some of the frequently asked questions in this post.
What is the 30% Tax Ruling in the Netherlands?
Taxes are a challenge for contractors working abroad, as you will be liable to pay and file taxes just like citizens. But some countries do offer incentives or allowances for ex-pat workers to ease the burden and encourage skilled migrant workers.
Working in the Netherlands
Contractors that want to work in the Netherlands will encounter income tax rates on their earnings as high as 50%. However, there is one way to offset the taxes paid with the 30% tax ruling for foreign workers. This ruling was made to help skilled foreign workers handle the cost of relocating to the Netherlands.
What is the 30% tax ruling?
The 30% tax ruling applies to highly skilled foreign workers and allows a company to offer 30% of the salary tax-free. It only is available to employees, and not self-employed workers. But if you are working with an umbrella company or have your own Dutch limited company, you may qualify. Either would have to be a registered Dutch sponsor for work visas.
How does it work?
The amount of salary would be reduced by 30% for payroll, and then the worker receives a 30% tax-free allowance in return. This means the company also avoids the salary burden for social security purposes. For example, a worker earning EUR 100,000 would only receive a taxable salary of EUR 70,000 in payroll. The rest would be paid as an allowance.
Who is eligible for the 30% tax ruling?
For you to be eligible for the 30% tax ruling, you have to meet the following requirements:
- You are recruited from abroad by a Dutch company. If you are already living and working in the Netherlands you are not eligible for this tax ruling.
- Both the worker and company agree in writing to have the 30% ruling applied. This is to ensure the worker understands the tax and social security effect of the ruling.
- You have skills or expertise that are scarce in the Netherlands. The criteria include education, skills and age, but this element will be met automatically if the salary threshold is adequate.
- The worker meets the salary threshold (adjusted annually). For example, in 2021 the minimum salary is EUR 38,961 after the 30% reduction is applied.
What are the pros of the 30% tax ruling?
The primary advantage of the 30% tax ruling is a reduction in taxes in the highest tax bracket for your salary level. Taxable earnings over EUR 68,507 are taxed at 49.5%, so the financial savings are considerable. If you are eligible, you are also considered a non-resident taxpayer no matter how long you stay in the Netherlands. You can also convert a foreign driver’s license to a Dutch license without taking a test.
How long can you claim the 30% tax ruling?
The 30% tax ruling can be claimed for five years.
How to apply for the 30% tax ruling?
The employer applies on behalf of the worker with the Dutch Tax Office, and the company must be a registered sponsor.
Using an umbrella company does simplify the process of contracting in the Netherlands, as your payments and contributions are handled for you. You would receive your net pay each month after the client and umbrella company confirm your completed timesheets or project. This eliminates any misunderstanding or conflict and ensures a smooth work relationship with your client.
Benefits include:
- Firstly, handle all client payments, tax withholding, and any social contributions
- Secondly, issue you a payslip each month, to a Dutch or foreign account
- Then, sponsor work permits for non-EU citizens
- Help set up the Dutch contract with the client
- Also, moderate any disputes with your client
- Last but not least, advise on access to totalization and double taxation treaties
Unless you are ready to do all of this on your own, using an umbrella company in the Netherlands is a great way to get started. You can always change to a different work structure if you decide to stay long-term or want more independence.
Contractor Taxation has umbrella companies in the Netherlands that are ready to assist you, from securing work permits, setting up contracts, and arranging prompt payment. Please contact us with your questions about contracting in the Netherlands.
If you have questions about contracting in the Netherlands or the 30% tax ruling, please contact us at Contractor Taxation.
