30% tax ruling to change, for better and worse

The 30% ruling is a tax facility that allows foreign highly skilled employees to easily obtain reimbursement of the additional costs incurred when moving to the Netherlands. In short, the tax facility means that 30% of their salary is paid tax-free. It aims to make the Netherlands financially attractive as a place to live for talented foreign employees. Employees working for a Dutch employer are eligible for the tax facility if they have been recruited from abroad and possess specific knowledge which is scarce in the Netherlands.

The steady growth of the use of the tax facility has prompted the government to critically review the 30% rule. The outcome is that the rules have been tightened and simplified. The three biggest changes are discussed below.  

Foreign PhD candidates no longer need to be recruited from abroad

Foreigners pursuing their PhD in the Netherlands are already in the Netherlands. If they subsequently find a job in the Netherlands immediately after obtaining their PhD they have not been recruited from abroad and as a result they are not eligible for the 30% tax ruling under the current criteria. The government has decided that this group of foreigners is important for Dutch society and wants to allow them to make use of the 30% tax ruling. Therefore the requirement that they must be recruited from abroad will no longer apply.

The exception is only made for foreigners living abroad prior to commencing their PhD programme. The other criteria are still valid (employment contract and shortage of people with their specific knowledge in the Netherlands).

Salary criterion for establishing expertise

The minister wants to make it easier to determine whether a person possesses specific expertise. This is currently demonstrated on the basis of a portfolio, outlining the person’s expertise. From 1 January 2012, instead of an analysis of someone's specific knowledge, there will be a minimum salary requirement. This minimum salary is in line with the income criteria in the highly skilled migrant scheme.

The 2011 minimum level is an annual salary of € 50,619. Most employees working for an academic institution do not meet this salary requirement, which means that they will be excluded from the 30% tax ruling in the future. Please note that a lower minimum salary of € 26,605 applies for PhD candidates. 

150-kilometre zone excluded

The 30% tax ruling is not only attractive to employees but often also to employers. Therefore in border areas a Dutch employer may give preference to a foreign candidate who lives just across the border rather than to a Dutch national. To eliminate this effect of the 30% ruling, it was decided not to grant the tax facility to those living within 150 km of the Dutch border at the time they are recruited.     

Day-to-day practice still unclear

At present it is still unclear how many areas of the tax facility will work out in practice. We have, for instance, not yet received  information on the effects of the change for current users of the 30% tax ruling. Furthermore, extensive lobbying is still taking place to make an exception for academic staff. We hope to be able to provide you more details in a next edition of the EURAXESS Newsletter. 

For more information on the 30% tax ruling, please visit the website.