30% Ruling For Your Employees and Split Payroll
Under certain conditions, employees hired from outside of the Netherlands, a special tax ruling exists called the ‘30% ruling’. The 30% facility ruling is a Dutch tax incentive to attract foreign employees with specific skills or expertise to work in the Netherlands.
The 30% facility ruling provides a tax free reimbursement (30%-allowance) which is deemed to cover all extra costs for staying outside of the country of origin. Other benefits apply, we will be happy to inform you of these benefits in our advice to you.
One of the conditions to be eligible for the 30%-ruling is that the employee should be assigned or recruited from outside the Netherlands. For safety sake, the Dutch employment/assignment agreement should preferably be concluded before arrival in the Netherlands.
If applicable, the 30% facility is granted for a maximum of 5 years (60 months). This period will generally be reduced with any earlier periods of stay or employment in the Netherlands.
The ruling allows an employer to provide an employee with a tax-free allowance of up to 30% of his/her wages, resulting in a cash benefit on the remuneration of around 15%.
We have a very competitive all-in fixed fee structure for 30% ruling applications.
Sometimes we can combine the Dutch 30% ruling with a split payroll. A split payroll or “salary split” is basically dividing one taxpayer’s taxable income between several countries. It usually relies on the application of international double taxation treaties entered into by most OECD countries. The idea is to become taxed in two or more jurisdictions and thus obtain a tax exemption of this income in the Netherlands. This always results in reducing the overall tax burden of the taxpayer as two or more tax exempt portions of the income will apply, lower progressive or marginal income tax rates, favorable tax regimes and last but not least, lower social security contributions. A split payroll may be applied to either directors and employees but also to self-employed individuals. We are not only able to advise you on the benefits involved in each specific situation, through our extensive network we can also provide you with the relevant employment agreements under each specific labor law regime.