30% ruling
The actual costs incurred by employees who are hired/assigned from abroad may be reimbursed tax free provided that these expenses can be proven. These extra-territorial costs basically include all costs that the employee would not have incurred had he or she not been assigned to the Netherlands. Costs that qualify as extra-territorial costs include, among others, costs related to double housing, language courses, residence permits, and home leave.
If certain conditions are met, a foreign employee working in the Netherlands may be granted a 30 per cent ruling. Under this ruling, a tax free reimbursement amounting to 30 per cent of the income from active employment can be paid to the employee. Apart from the base of the 30 per cent ruling the employer can reimburse the school fees for an international school for the kids of employees tax free in full.
The 30 per cent reimbursement is intended to cover all extra-territorial costs. If the 30 per cent ruling is applied, the actual extra-territorial costs cannot be reimbursed tax free in addition to the 30 per cent reimbursement. However, if the actual extra-territorial costs are higher than the 30 per cent reimbursement, you can choose to reimburse these higher actual costs tax free if proof of the costs is available.
There are several requirements to qualify for the 30 per cent ruling:
• The foreign employee should have specific expertise that is not available, or is scarce in the Dutch labour market. This is based upon a salary norm: thegeneral gross salary has to amount to a minimum of EUR 38,347 (i.e. EUR 54,781 including tax free reimbursement of 30 per cent). A lower norm amounting to EUR 29,149 (i.e. EUR 41,641 including tax free reimbursement of 30 per cent) applies to individuals with a university degree who are younger than 30.
• The employee must have lived outside a 150 kilometer radius of the Dutch border during more than 2/3 of a 24-month period before taking up Dutch employment in order to qualify for the 30 per cent ruling.
• An application for the 30 per cent ruling must be filed within four months after starting the Dutch employment. If this period is exceeded, the ruling, if granted, will only apply as of the month following the month in which the application was filed. The 30 per cent ruling may only be applied if the employee is included in a Dutch wage tax administration.
As of January 2019, the maximum term of the 30 per cent ruling and the tax free reimbursement of actual extraterritorial costs have been reduced from eight to five years. Transitional law is applicable for existing cases for a maximum period of two years.
The 30 per cent ruling lapses at the end of the next wage tax period following the wage tax period in which the Dutch employment was terminated. The 30 per cent ruling cannot be applied on post-departure income. Hence, the 30 per cent ruling can, in principle, not be applied on bonuses and equity income that becomes taxable after having left the Netherlands in most situations.
Brouweel
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