What is the 30% Ruling?
The 30% ruling is a Dutch tax benefit that allows employers to pay up to 30% of a qualified foreign employee's salary tax-free for a maximum of five years.
This creates a win-win situation. Employees enjoy significant tax savings on their income, whilst employers can offer more competitive compensation packages to attract international talent. For example, if you're an international professional earning €100,000 annually in the Netherlands, your employer can designate €30,000 of that salary as a tax-free allowance, meaning you'll only pay Dutch income tax on the remaining €70,000.
The 30% ruling allows employers to provide a tax-free allowance of up to 30% of an employee's salary to qualified foreign workers for a maximum of five years. This reimbursement is intended as compensation for the costs that international employees incur when moving to a new country for their work, covering what are known as "extraterritorial expenses."
These extraterritorial costs include everything from travel expenses for visiting family in one's home country to higher living costs in the Netherlands. Rather than requiring employees to document actual expenses, the ruling provides a flat-rate tax exemption, simplifying administration for both parties.
Key changes for 2025 and beyond
The 30% ruling has undergone significant modifications following the Dutch government's 2025 Tax Plan, affecting both current and future employees as well as the companies that employ them. The previous scaling back (30-20-10 ruling) will be reversed and a constant flat rate of 27% will be introduced as of January 1, 2027.
Timeline of changes
- 2025-2026: For 2025 and 2026 a percentage of 30% will still apply to all eligible employees, providing stability during the transition period.
- From 2027: The government proposes introducing a constant flat rate of 27% as of January 1, 2027, marking the end of the traditional 30% benefit rate.
Salary threshold increases
As of January 1, 2027, the salary threshold (after application of the 30% ruling) will be increased from €46,107 to €50,436 (2024 price level). For younger professionals, the salary threshold will be increased from €35,048 to €38,338 (2024 price level) for incoming employees under 30 years of age with a Master's degree.
For 2025, the taxable wage of an employee should exceed €46,660 (2024: €46,107) on an annual basis, whilst the taxable wage of an employee who possesses a master's degree and is younger than 30 years of age should exceed €35,468 (2024: €35,048) on an annual basis.
Eligibility requirements for the 30% Ruling
To qualify for the 30% ruling in 2025, candidates must meet several stringent criteria:
Employment relationship
You must have an employment relationship with a Dutch employer. This includes traditional employees as well as entrepreneurs who establish a Dutch BV (private limited company) and become employees of their own company.
Recruitment from abroad
You must be recruited from outside the Netherlands by your first Dutch employer, or you are on assignment in the Netherlands from another country. This requirement ensures the ruling targets genuinely international talent rather than domestic workers.
Distance requirement
You must have lived at a distance of more than 150 kilometres as the crow flies from the Dutch border for more than 16 months in the 24 months prior to your first working day in the Netherlands. This effectively excludes residents of neighbouring countries like Belgium, Luxembourg, and parts of Germany.
Specific expertise
The most subjective requirement involves demonstrating specific expertise that is scarce in the Dutch labour market. Meeting the salary threshold is typically sufficient proof of this expertise.
Written agreement
Both the employer and employee must agree in writing that the 30% ruling will apply. This agreement can be included in the employment contract or added as an addendum.
Important changes to partial non-residency status
One of the most significant changes affects the partial non-residency status that previously accompanied the 30% ruling. As of 1 January 2025, you can no longer opt for partial foreign tax liability in your tax return.
Employees who receive the 30% ruling have the possibility to choose the partial non-residency treatment. These employees have a very limited (or no) obligation to report and pay income tax over their private investment income (Box 2 and Box 3) in the Netherlands during the period the 30% ruling is applicable.
However, if you used the Expat Scheme before 2024, you can still use the partial foreign tax liability until 2026 due to transitional law. This represents a significant change for new applicants, who will now be subject to full Dutch taxation on their worldwide income.
Income cap and maximum benefits
As of January 1, 2024, a cap on the tax-free allowance under the 30% ruling was introduced, linked to the 'Balkende norm,' which is indexed annually. For 2025, the norm is set at €246,000. This means that the maximum tax-free allowance is €73,800 (30% of €246,000).
This cap ensures that the ruling's benefits are proportionate and prevents excessive tax advantages for the highest earners.
Transitional arrangements for the 30% Ruling
The Dutch government has implemented several transitional provisions to protect existing beneficiaries:
Pre-2024 beneficiaries
The government proposes retaining the current transitional rules from the 2024 Tax Plan for incoming employees who were already using the 30% ruling no later than December 31, 2023. This means that these employees will retain the right to an untaxed allowance of 30% and the current (inflation-adjusted) salary thresholds during the entire term of their ruling decision.
2024 beneficiaries
For incoming employees for whom the 30% ruling applied for the first time in 2024, the constant flat rate of 27% will apply as of January 1, 2027.
Application process and timing
As of 1 January 2025, pro-forma requests for the 30% ruling must be completed within twelve months of submission to the Dutch tax authorities to ensure retroactive application from the employment start date. Failure to meet this deadline will result in the tax benefit commencing from the first day of the month following the submission of the complete application.
Strategic considerations for employers and employees
For employers
For organisations operating in the Netherlands or considering expansion, the 30% ruling remains a powerful tool for attracting international talent, despite recent changes. The certainty provided by maintaining the 30% rate through 2026 offers a planning window for recruitment strategies.
Companies should consider the administrative complexity introduced by having employees under different regimes simultaneously. Employers will need to track and manage both different salary thresholds and different percentages for the ruling, depending on when an employee first qualified. This requires robust payroll systems and clear documentation processes.
For employees
International professionals should carefully consider the timing of their move to the Netherlands. Those who secure the 30% ruling before 2025 will benefit from more favourable transitional arrangements, whilst those starting in 2025 or later will face the new 27% rate from 2027.
Employees should also prepare for the end of partial non-residency status, which means planning for full Dutch taxation on worldwide income. This may require consultation with tax advisers to optimise overall tax positions, particularly for those with significant international investments or income sources.
Looking ahead
The 30% ruling continues to serve both employers and employees well, despite the upcoming changes. Businesses in the Netherlands have historically depended on the 30% ruling scheme to attract international talent, given the differences in employment and social security taxation across the world and the limited pool of available highly skilled workers.
For employees, whilst the reduction to 27% from 2027 represents a decrease in benefits, the ruling continues to provide substantial tax advantages that make the Netherlands an attractive destination for international professionals.
The key for both employers and employees is understanding the transitional arrangements and planning accordingly. For employers, this means factoring the ruling into total compensation packages and ensuring robust administration systems. For employees, early application and clear documentation of eligibility criteria remain essential for maximising the benefits of this valuable tax incentive.
How Boundless can help
Ready to hire in the Netherlands or considering expanding your team there? Our expert team can help you navigate the 30% ruling requirements, ensure compliance, and optimise your international hiring strategy. Contact us today to discuss how we can support your Netherlands employment needs.
