30/09/2024
Legislation

The 30% tax ruling in the Netherlands: A benefit for expats

Moving to a new country can be a real challenge. The 30% tax ruling makes it a bit easier for expats coming to the Netherlands. This tax advantage helps to save on the extra costs of living and working abroad. In simple terms, your employer can compensate your so-called ‘extraterritorial costs’ tax-free. The option to apply for the ruling makes the Netherlands an attractive destination for skilled professionals who are interested in a tax-free allowance and it also helps to develop Dutch labour market. Let’s talk about the 30% ruling: when it’s applicable, how it works, and how you can benefit from it.

What is the 30% ruling?

The 30% ruling is a tax benefit for employees who come to work in the Netherlands from abroad. Essentially, it allows employers to pay up to 30% of gross salary tax-free. This can significantly increase employee’s take-home pay. However, starting from January 2024, there’s a cap on the maximum amount you can receive tax-free, set at 30% of €233,000 for 2024, or €69,900 per year.

This cap means that the higher your salary, the more significant the impact of the cap will be on your tax-free allowance. For high earners, this change might reduce the overall benefit of the 30% ruling, but it still offers considerable tax savings.

Who qualifies for the 30% Ruling?

To be eligible for the 30% ruling, you must:

Be recruited or transferred from abroad (you must not have lived within 150 kilometres of the Dutch border for more than 16 months in the 24 months prior to your first working day in the Netherlands). This means you can’t have lived in Belgium, Luxembourg, or parts of Germany.
Have specific expertise that is not readily available in the Dutch labour market.
Meet the income criteria. In 2024, your salary, excluding the tax-free allowance, should be more than €46,107 (or €35,048 if you’re younger than 30 and hold a Master’s degree from a recognized university).

There are exceptions for scientific researchers and doctors in training. These categories can apply for the 30% ruling regardless of their (lower) salary.

Dropping from the 30% ruling to the 27% ruling.

Changes to the 30% rule in 2024

Here’s the kicker: Your maximum compensation is no longer 30% over the entire term. From January 2024, you’re only entitled to a maximum compensation of 30% of your salary for the first 20 months of your decision. For the second 20 months, you’re entitled to 20%, and for the third 20 months, you’re entitled to 10%. If you already had a decision in 2023, you can still be entitled to a maximum untaxed compensation of 30% for the entire term. There is a transition period for those employees, who already enjoy the ruling, depending of when they got it approved.

Hilfort’s advisors are happy to explain you more in regards to your (or your employee’s) situation.

Benefits of the 30% ruling

The 30% ruling is meant to help expats with there transition to the Netherlands. These are the main benefits:

Financial savings: when moving abroad, expats may experience difficulty adapting to the new culture, environment and financial expectancies. The 30% ruling helps buffer the financial adjustments. With the income tax-free adjustment that helps expats safe money and adjust to living in a new environment.
Convenience: there are more benefits for highly-skilled migrants wi ruling, for example they can simply change their driving license and don’t need to pass the exam.
Tax status: sometimes you could be eligible for partial non-resident status, which can result in benefits for income tax on savings and investments.

Applying for the 30% ruling

The application process is quite straightforward:

Application: Together with your employer you submit an application to the Dutch tax authorities.
Required documents: Provide necessary documents. E.g.: documents that show that you’ve being recruited from abroad, details of your education, employment contracts. By providing the requested documents you are submitting the necessities to validate the 30% ruling request. The tax authorities can then validate your request for the tax exemption by conducting the necessary checks.

We would recommend to start the application process as soon as possible. Discuss the timeline with your employer (or Hilfort). Early submission helps to start benefiting from the ruling without delay. But you always have an option to apply within 3 months after the start date. It is important to know, that first salaries you get in the Netherlands will be applied without the ruling, as the authorities need time to approve it. But as soon as the decision is ready, you will get your money back retrospectively. The average decision making time is 14 weeks.

Changes towards 2027

Starting from 2027, the 30% ruling will transition into a 27% ruling. This means that expats will only be able to receive 27% of their gross salary tax-free instead of 30%. Additionally, the salary threshold will be increased, making it more difficult for newcomers to qualify for the ruling. A transitional arrangement will be in place for expats who obtained the 30% ruling before 2027, allowing them to keep their 30% benefit for the duration of their original term. Expats entering after 2027 will need to meet the new thresholds and conditions to benefit from the reduced 27% ruling.

Common Questions

Can the 30% ruling be applied retroactively?

Yes, if the application is submitted within four months of starting your job, it can be applied retroactively. This flexibility ensures you don’t miss out on benefits if there’s a delay in the application process.

What if I change jobs?

You are still eligible to the 30% ruling if you switch within 3 months. However, the new employer should sent a new application. If you switch employers within three months, the ruling can continue with your new employer under certain conditions. This continuity makes it easier to maintain your tax benefits without significant disruptions.

Does the ruling apply to bonuses?

Yes, it can be applied to bonuses as part of your taxable salary. Including bonuses can further enhance your financial savings under the ruling.

How long is the decision about the 30% ruling valid?

The validity depends on when the decision was issued. For decisions issued between January 1, 2012, and January 1, 2019, it is valid for eight years. For decisions issued as of January 1, 2019, it is valid for a maximum of five years. Understanding the validity period helps in planning your long-term stay and financial strategies in the Netherlands.

Practical Tips for Expats

1. Financial Planning: With the phased reduction in the tax-free allowance, it’s pivotal to plan your finances. Maximize savings and investments during the initial 20 months when the tax-free allowance is highest.

2. Legal and Tax Advice: Consulting with a tax advisor or legal expert can help you navigate the complexities of the ruling and ensure you comply with all regulations.

3. Relocation Assistance: Many expats will find help of dedicated professionals useful while changing the countries. Hilfort is glad to assist in all the payroll and ruling questions.

4. Networking: Joining expat communities and professional networks can provide support and valuable information about living and working in the Netherlands. These networks can also offer insights into making the most of the 30% ruling.

Conclusion

The 30% ruling can make a big difference in your finances as an expat in the Netherlands. And even though the upcoming changes will have an impact, the 30% ruling still offers substantial benefits. For more details or if you want to know more about how to apply, feel free to reach out to us at Hilfort. You can also approach us with other questions, like the Dutch employment law. Our experts will make your stay in the Netherlands hassle free.

Still curious about how the 30% ruling can benefit you? Or perhaps you need a hand navigating the application process? Contact Hilfort today! We’re here to help you make the most of your move to the Netherlands. With our expertise, you can enjoy the financial benefits and ease into your new life with confidence.

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23/09/2024
Legislation

From 30% ruling to (20)27% ruling

Recently, we published a post on LinkedIn about the changes regarding the 30% ruling that were expected to be announced on Prinsjesdag (Budget Day). Our expectations, which you can read about in part 1, were confirmed. However, that doesn’t mean that a new law came into existence, that still requires extensive voting. We do expect these changes to the 30% ruling to make it through the voting and be implemented in the next few years, possibly with some minor adjustments here and there.

What do we know now?

As mentioned earlier, the 30% ruling will eventually change to a 27% ruling. This will not happen in 2025 but as of January 1^st, 2027. This means there will be a transitional arrangement in several areas, which we will explain in detail shortly. The salary threshold will also be significantly increased, so that incoming employees—the so-called expats—will be less likely to qualify for the brand new 27% ruling.

Enough talk. How will the next few years look like?

There will be transitional arrangements in several areas. We have summarized them for you, including changes that are already relevant as of this year (2024)!

2024:

Employees who are eligible to apply for the 30% ruling in 2024 or earlier will retain the 30% rate for the entire duration of the 30% ruling (usually 5 years or 60 months). The start date of the ruling is decisive and must include a start date in 2024 or earlier, even if the ruling is issued retroactively in 2025.

For example, an employee who receives a 30% ruling that starts on December 1^st, 2024, will retain the 30% tax benefit until November 30^th, 2029. The increased salary threshold will not apply to this group and will remain based on the current indexed salary threshold. This also applies to incoming employees under the age of 30 and in possession of a recognized master’s degree.

The previously announced reduction measures (from last year) are therefore completely off the table.

2025 and 2026:

Employees who receive their 30% ruling in 2025 or 2026 will already be part of the new regime, but will still enjoy the 30% benefit in both 2025 and 2026.

These employees will have a separate transitional arrangement, as they will receive a reduced benefit of 27% instead of 30% starting in 2027 but will not have to meet the increased salary criterion by 2027.

2027:

Everyone who becomes eligible for the 30% ruling after 2027 will receive only a 27% benefit and must meet a higher salary threshold, which will be indexed in the intervening years. Currently, the higher threshold is set at €50,436 (in 2024, it is €46,107), and the under30 version is set at €38,338 (in 2024, it is €35,048). It doesn’t make much sense to put too much stock in these figures as of yet, since they will be indexed in the coming years, the legislation won’t take effect for another two years, both chambers (2e kamer en 1e kamer) still need to approve it, and historically we’ve seen that until the law is written it is bound to be (slightly) altered.

In short, we now know that earlier measures will be reversed and that for the next two years not much will practically change. In 2027, if everything takes shape as is projected in this article, payroll administrators will face a greater challenge to keep track of which employees are still entitled to the 30% ruling and who has to settle for the 27% ruling if they make the salary threshold. Fortunately, you know where to find us by now, right?

04/06/2024
Legislation

Dutch employment law for expats

Renowned for its progressive labor laws, the Netherlands sets a global benchmark for worker rights, balancing economic growth with social welfare. At the heart of its employment philosophy lies a commitment to fairness, work-life balance, and inclusitivity. This makes employment in the Netherlands highly desirable.

The Dutch employment landscape

Expats stepping into this dynamic market will find a variety of work arrangements – from traditional full time roles to flexible part time positions and self employed ventures. The Dutch labour law provides a protective umbrella that covers extensive rights concerning contracts, dismissal protections, and unemployment benefits, ensuring a secure environment for all workers. This protective stance extends to promoting equality in the workplace, with stringent regulations against discrimination and a proactive approach to employee well-being.

Full time employees require a passport to move to the Netherlands

First steps in Holland: What expats need to know

Embarking on a career in the Netherlands marks the beginning of a new chapter. However, before diving into the Dutch work culture, there are essential legal steps and considerations that pave the way for a smooth transition. Here’s a roadmap to guide you through the initial processes:

Securing the right to work and live

First and foremost, expats from outside the EU/EEA and Switzerland need to obtain a work permit (TWV) and a residence permit. The highly skilled migrant visa is particularly popular, offering a streamlined process for those meeting the salary threshold and other criteria set by the Dutch government.

Registration and social security number

Upon arrival, registering with the local municipality is a must. This registration grants you a BSN (Burger Service Nummer), the Dutch social security and tax number, which is crucial for employment, opening a bank account, and accessing healthcare services.

Understanding Dutch Health Insurance

Health insurance is mandatory in the Netherlands. Expats must subscribe to a basic health insurance plan within four months of their arrival or upon receiving their residence permit. Failure to do so can result in fines and retroactive premium charges.

Banking in the Netherlands

Setting up a Dutch bank account will streamline your financial transactions, including receiving your salary and paying for services. Dutch banks often offer international services tailored to expat needs.

Housing and Living Arrangements

The housing market in the Netherlands is highly competitive, especially in the Randstad and larger cities. Expats should consider carefully to opt for temporary housing or a long term lease. Understanding your rights and responsibilities as a tenant is also crucial.

Cultural Adaptation

While not a legal requirement, familiarizing yourself with Dutch culture and society can significantly enhance your experience. The Dutch value direct communication, punctuality, and a good work-life balance. Learning the basics of the Dutch language, although not mandatory due to the widespread use of English, will help in everyday interactions and integrating more fully into the community.

Understanding your employment contracts

Securing a job in the Netherlands is a significant milestone for expats, but it’s equally important to understand the nuances of your employment contract before signing on the dotted line. Dutch employment contracts are comprehensive documents that delineate your rights, obligations, and the terms of your employment. Here’s what you need to look out for:

Types of contracts

There are generally three types of employment contracts in the Netherlands – indefinite period (permanent contract), definite period, and temporary contracts. While permanent contracts offer the most security, fixed term contracts are common for expats and can lead to permanent employment.

Working hours and overtime

Your contract will specify your weekly working hours, including any expectations of overtime and compensation for it. Dutch and international law protects wokrers from excessive work hours, so it’s important to ensure that your contract reflects a healthy work-life balance.

Be aware that most in Netherlands employment law a trial period is standard. The Dutch dismissal law determines whether a trial period is valid, though a trial period rarely breaks Dutch civil code.

Monthly salary and Additional Compensation

Apart from your basic salary, the contract should outline any bonuses, allowances (such as travel or housing allowances), and holiday pay. In the Netherlands, employees are entitled to holiday pay, which is typically paid out in May and amounts to at least 8% of your annual salary.

Vacation and Leave Entitlements

Dutch employees are entitled to a minimum of 20 vacation days per year, with many employers offering more. Your contract should clearly state your leave entitlements, including specials leaves such as maternity/paternity leave and any company-specific leave policies. On top of that, there’s sick pay and holiday entitlement.

Notice Period and Termination conditions

Dutch employment law offers strong protection against dismissal, so ensure these conditions are clearly stated. Both you and your employer should be aware of this period.

Non-Compete Clauses

Some contracts include non-compete clauses that restrict your ability to work for competitors after leaving the company. If such a clause is included, it may impact your future employment opportunities, so it’s essential to understand any restrictions imposed.

Collective Labour Agreement (CAO)

Many sectors in the Netherlands are governed by collective labour agreements that may affect your employment conditions, like the minimum wage at your employer or how to handle employment disputes. If your role falls under a CAO, ensure you understand how it influences your contract terms.

Pension Plans

Employer-contributed pension plans are common in the Netherlands. Your contract should detail the pension scheme you’re enrolled in, including contribution rates and any conditions.

Navigating work permits and visas

Dutch law has created a maze of work permit- and visa processes. Although the Dutch immigration system is designed to be transparent and efficient, the specifics to ensure compliance and avoid any legal hurdles are highly complicated and require experienced support. At Hilfort, we’re especially experienced in the process for highly skilled migrants. These are professionals who meet a specified salary threshold, demonstrating the high demand for their skills in the Dutch job market.

Application process

For the highly skilled migrants, the employer (Hilfort) initiates the application with the Immigration and Naturalisation Service (IND). For this process, the employee requires a predetermined minimum wage. Sponsored employment agencies are required for this step. Hilfort is such an employment agency.

Documents and requirements

Applicants need to provide, among other documents, a valid passport, employment contract, academic qualifications, and proof of accomodation in the Netherlands. Specific requirements van vary, so it’s important to consult one of our experts at Hilfort.

Duration and renewal

Work permits and visas come with varying validity periods, often tied to the length of your employment contract. Keeping track of expiration dates is crucial, as renewals or changes in employment circumstances require timely notification to the IND.

Family members

In most scenarios, it’s possible to bring your family members. Consult our experts at Hilfort to find out exactly which documents your family requires to join you on your journey in the Netherlands.

Dispute resolution and legal resources

When it comes to working in the Netherlands, it is important to understand the available avenues for dispute resolution and accessing reliable legal resources to ensure a secure employment experience. Disputes, whether related to employment contracts, work conditions, legal issues or misunderstandings about legal obligations, can arise despite the best intentions of all parties involved. For both employees in the Netherlands and employers, knowing how to address these issues constructively is key to maintaining a positive working relationship and ensuring compliance with Dutch employment law for expats.

Employee perspective: Be aware of the rights and protections afforded to you under Dutch law. This includes understanding the process for raising grievances, whether through internal procedures or, if necessary, escalating to external bodies like the Dutch Labour Authority or through legal action to reach a settlement agreement.

Employer perspective: Ensure that your HR policies comply with Dutch employment standards, Dutch labour laws and Dutch dismissal law.

For those expats and companies in need of specialized legal advice or assistance with dispute resolution, consulting with experts who are well-versed in Dutch labour law can be invaluable. Firms like CBBS Advies offer professional guidance to navigate these complex issues, ensuring both employers and employees can find equitable solutions. For specific information or tailored advice, contacting the experts at CBBS Advies is a recommended step towards resolving any legal concerns in the expat employment context.

Employee rights and employee benefits for expats

The working conditions for expats in the Netherlands are beneficial thanks to Dutch legislation. One key financial incentive is the 30% ruling, which is designed to make the Netherlands an attractive destination for highly skilled professionals. Another benefit is the relocation allowance, with which the Dutch employment law recognizes the issues that come with migrating to a new country.

30% ruling:

The 30% ruling is a distinctive tax benefit offered by the Dutch government. It allows expats to receive 30% of their gross salary tax-free. To be eligible, expats must meet certain criteria, including possessing skills considered scarce within the Dutch labour market. This ruling not only serves as a financial incentive for potential expatriate employees but also simplifies the transition of living and working in a new country.

Relocation allowance:

Relocation allowances are designed to support expats in covering the initial costs associated with moving to a new country for work. These allowances can encompass a broad range of expenses, from moving and transport costs to temporary housing and language training.

Expat at Hilfort

At Hilfort, the complexity of securing work permits and visas for our international talents is handled with precision and case to allow a seamless transition for our employees to the Netherlands. We recognize the potential challenges expats face when navigating Dutch immigration laws and act as the navigator throughout the entire process, taking on legal, administrative, and procedural responsibilities.

From the moment an expat is offered a position, Hilfort steps in to manage the intricacies of the application process, from sponsorship recognition (through us) to liaising with the Dutch Immigration and Naturalisation Service (IND). Our dedicated HR professionals prepare and submit all necessary documentation while ensuring that every detail meets the regulatory requirements. We communicate directly with the authorities, addressing queries and providing additional information as needed, thereby lifting the burden from our employees.

Expats at Hilfort need only follow the guidance provided by our experienced team, submitting personal documents when requested and attending necessary appointments. We aim to make the process as straightforward as possible, allowing our new emplpoyees to focus on their relocation and integration into their new role without the stress of legalities. Hilfot’s approach is designed to provide peave of mind, demonstrating our commitment to supporting our international talents every step of the way.