Changes to the 30% ruling?

June 16, 2017 | Blog

The Netherlands has a special tax facility for employees hired from abroad, the so-called "30%-ruling". This facility enables an employer to pay an employee a tax-free allowance up to 30% of the employment income. As a result, the effective marginal top income tax rate is reduced from 52% to 36.4%. The maximum period for the 30% ruling is eight years. The tax-free allowance is intended to cover the additional expenses ('extra-territorial costs') related to the (temporary) stay outside the home country.


This week, research agency Dialogic has sent an evaluation report on the 30% ruling by order of the Dutch Ministry of Finance to the House of Representatives. According to the report, the tax regime for the compensation of extraterritorial costs for qualifying employees (expats) is effective on all fronts. The relative simplicity of the 30% ruling contributes to the image of the Netherlands as an attractive place of business.


However, based on the research, the current expat facility is too broad. The actual costs expats make are not the assumed 30 percent of their income, but usually approx. 20 percent. For expats with a salary of more than the so-called Balkenende standard, the facility is implicitly a tax allowance. Besides that, expats from nearby countries have relatively few actual extraterritorial costs. As a result, they benefit relatively more from the facility. The research agency therefore advises to simplify the 30%-facility.


The research agency feels that some adjustments may have a positive effect on the effectiveness, efficiency and / or appropriateness in terms of height of the tax-free allowance:

  • Reducing the period of validity to five or six years;
  • Extending the 150 kilometer criterion with regard to the former place of residence of the expat;
  • Reducing the flat-rate reimbursement for employment income above EUR 100,000.


As a new Dutch Cabinet is currently being formed, the decision-making process is transferred to the next Cabinet. We will keep you informed on further developments.

If you have any questions about this subject, please contact Joost van Benthum. 


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