The best tax benefit we have in the Netherlands is the 30% ruling. This has recently been confirmed by the European Court who indicated that the requirements to qualify for this rule are not discriminatory, but that the rule is an overcompensation.
30% ruling – overcompensation
Overcompensation is good especially when the tax office is financing this overcompensation. The Dutch Government is maybe aware of the overcompensation, but has left the situation as it is with the 30% ruling. The reason is the substantial difference the 30% ruling makes to an experienced and highly educated work force that choses to work in the Netherlands over other European countries.
That said, the European court has indicated to the Dutch Government that the 30% ruling is regarded a fiscal incentive that is too lucrative and needs to be updated. In time we will learn how this is done.
Requirements 30% ruling
The requirements that need to be met in order to qualify for the 30% ruling are:
- You need to have been attracted from abroad by a Dutch resident employer;
- Your taxable income cannot be lower than EUR 36.705 (this equals gross income of EUR 52.435) or if you are under 30 years old and you hold a master degree EUR 27.901 (which equals gross income of EUR 39.858.
- You cannot have lived within a 150 km distance from the Dutch border during a 24 month period before your arrival in the Netherlands. There is a 8 month exception in this 24 month period;
- If you have lived in the Netherlands during the past 25 years, those periods combined are deducted from the maximum 8 year period of the 30% ruling. If no time is left over, no 30% ruling.
That implies that you cannot apply for the ruling when you had personal motives to come to the Netherlands (love), or your income is not high enough, you have lived too close to the Netherlands or were a born and raised Dutch person. All criteria that make you cannot have the 30% ruling.
Cafetaria model
The expats arriving in the Netherlands that cannot qualify for the 30% ruling can have an alternative solution, which does not fully make good the difference with the 30% ruling, but provides some relief: the cafeteria model.
Under certain conditions the employer and the employee can amend the employment agreement in which the cafeteria model is included. The cafeteria model makes it possible that certain costs an immigrant worker has opposite a local employee, can be compensated.
Examples are flights home to family, double housing costs, study costs including Dutch courses. This is not the full list but an indication of the possibilities. The employee is not so much reimbursed these costs, but the costs can be swapped for gross salary. Your taxable gross salary reduces, which makes the wage tax lower, in that the employee finds it benefit from the cafeteria model.
Differences Cafeteria model vs 30% ruling
If the 30% ruling is granted, no proof needs to be provided. The 30% of the salary is exempted from wage tax. With the cafeteria model the costs made need to be proven.
The costs in the cafeteria model do not come near the 30% that applies under the 30% ruling. Maybe half if the model is used to its max.
The 30% ruling expires after 8 years, the cafeteria model does not. That said, double housing costs will end one day, so will flights to family, depending on the definition of family.
Orange Tax Services
We are able to assist you, the employee and or employer with the 30% ruling application. We can make the difference when the Dutch tax office has the opinion the 30% ruling maybe does not apply.
With respect to the cafeteria model we can assist with drawing the amendments to the employment contract, request for approval from the tax office and provide a guideline what is and what is not applicable under the cafeteria model.
