Written by Sebastian Schreijer
The Dutch take on stimulating labour mobility in the EU
In my previous blog, I discussed the benefits of participating in the Erasmus exchange programme. My main argument in favour of the Erasmus programme was its ability to stimulate labour mobility in the EU. After all, a study experience in another country makes people more inclined to seek out international opportunities once they enter the job market.
Fortunately, there are more ways of enhancing European labour mobility. One of the tools that can be used to this end is the Dutch ‘30% ruling’. This is a tax benefit that serves to facilitate international professionals settling in the Netherlands.
However, despite the obvious benefits and fairly simple structure of the 30% ruling, I still encounter many companies and (future) employees who do not fully understand the procedures and criteria that apply to the ruling. For this reason I deemed it useful to briefly summarize the purpose, the benefits and the conditions of the 30% ruling.
What’s it about?
In short, the 30% ruling is a measure whose primary purpose is to attract foreign professionals for job positions for which the Dutch labour market does not provide enough personnel itself. It does this by compensating for the costs associated with moving from one country to another.
How does it work?
The employer is able to deduct up to 30% of the employee’s gross salary. He can then provide this amount to the employee as a tax-free (net) remuneration; only the remaining gross amount is taxed. This can be applied for a period of up to 5 years!
The 30% ruling also comes with extra benefits, such as being able to change your driver’s license for a Dutch one for free, and being able to deduct from your taxes the costs of a private international school for your children.
What are the conditions?
In essence, the ruling has 3 strict rules which apply at all times:
- The candidate must be recruited from outside the Netherlands. This means that, when the contract is signed, the employee is not yet registered as a Dutch citizen, and lives 150 kilometres or more outside the Dutch border.
- The expertise of the employee must have been designated by the Dutch government as being scarce on the Dutch labour market.
- After applying the ruling, the remaining yearly gross salary of the employee should be higher than €36,705. An exception is made for people who have a Master’s degree AND are under 30 years of age: for them, the minimum gross salary needed to be applicable is €27,901.
What do I need to look out for?
Here is important advice for all those who wish to be eligible for the 30% ruling:
- Do not accept a trial contract below these figures, even if you are promised to get an increased salary in a few months. You can only apply for the ruling if you meet the conditions when entering the Netherlands, and only with your first employer.
- It is a very common mistake to think that you are obliged to use the full 30% of the ruling and need at a minimum gross salary of €52,436 (or €39,859 for Master graduates under 30) to be eligible for the ruling. In reality, you are able to obtain the 30% ruling at any gross salary, as long as your gross salary remains higher than the above-mentioned gross salaries after deducting the net amount.
1. 30% ruling is fully used:
32 years old, €60,000 gross per year. 30% means 18.000 tax-free salary and paying taxes over the 42.000 gross that remains.
2. 30%ruling is partially used:
32 years old, €40,000 gross per year. Only 40.000 – 36.705 = 3.295 can be used as a tax-free salary and taxes are paid over the 36.705 that remains. In this case, only an 8,2%-ruling applies!
Image source: cc Lies Thru A Lens | Flickr