Umbrella Company and the Dutch 30% ruling
Due to a special clause for foreign employees working in the Netherlands, the Dutch tax system incorporates a substantial allowance for tax-free income. Commonly known as the Dutch 30% ruling, this clause was designed as an incentive for foreign nationals with expertise in specific fields underrepresented in the Dutch job market, encouraging these specialists to consider working in the Netherlands.
Under Dutch 30% ruling, expatriate workers in the Netherlands are able to receive a 30% tax-free remuneration. Umbrella Company is able to seamlessly integrate the Dutch 30% ruling into the services it provides to expatriate contractors, allowing them to benefit fully from the Dutch tax system without additional effort on their behalf.
What are the conditions of the Dutch 30% ruling?
In order to benefit from the Dutch tax system, several conditions must be met. Firstly, any expatriate contractor wishing to make use of the Dutch 30% ruling must be employed in the Netherlands.
Furthermore, their employers must be able to justify the application of the Dutch 30% ruling by demonstrating that the position fulfilled by an expatriate employee requires specialized knowledge not available in the Dutch job market.
The Dutch 30% ruling can be applied for a maximum period of 10 years. Any prior employment in the Netherlands will be subtracted from this period. As such, Umbrella Company advises expatriate contractors to assess their situation as quickly as possible in order to fully utilize the potential benefits of the Dutch 30% ruling.
What are the financial consequences of the Dutch 30% ruling?
Following Dutch tax legislation, the Dutch 30% ruling does not offer a 70/30 split of gross salary into taxable and non-taxable income. Instead, employees who opt in to the Dutch 30% ruling receive 70% of their gross salary as total taxable income. The 30% referenced in the ruling is then paid as additional tax-free remuneration. This leads to a tax benefit for employers, and a higher net income for those employees eligible for the Dutch 30% ruling.
However, the Dutch tax system calculates employee benefits such as pension using total gross salary. As only 70% of the income earned under the Dutch 30% ruling consists of taxable salary, electing to use the Dutch 30% ruling decreases the level of benefits one can accrue.
Due to our experience as a financial service provider, Umbrella Company is familiar with the intricacies of the Dutch tax system and related legislation. Our specialized knowledge of the Dutch 30% ruling uniquely qualifies Umbrella Company to offer umbrella company services to expats working in the Netherlands.