30% ruling, for many of our clients with international employees we apply the ruling in the payroll administration. As of 1 January 2012 the 30% ruling has changed. These changes can also affect employees with a 30% ruling that were already on the payroll before 1 January 2012. We would like to explain to you what to look out for in order to prevent that the 30% ruling can no longer be applied.
Employees who are assigned to come work in the Netherlands, often receive an allowance for the additional expenses they incur. The so-called extraterritorial expenses. For reimbursing these expenses the employer can choose to reimburse the actual costs or to apply the Dutch 30% ruling (if the conditions are met). Generally speaking employers choose to apply the 30% ruling as you can reimburse this without having to keep proof of expenses in your financial administration such as receipts. With the 30% ruling you can reimburse a maximum of 30% of the wage including the allowance as tax free expenses for extraterritorial expenses. When an employer chooses to reimburse additional expenses in addition to the 30% ruling as for example housing or health insurance these are considered taxable wage. There are some exceptions such as international school fees which can be reimbursed tax free in addition to the 30% ruling.
In order to be allowed to apply the 30% ruling the following conditions have to be met:
In order to ascertain if the employee has a specific expertise the Dutch tax authorities look at 3 factors:
In order to proof a specific expertise a salary norm applies that is indexed annually. For 2014 the salary norm is minimal EUR 36.378 (excl. the 30% allowance). For employees younger than 30 with a master degree the salary norm is lower and is EUR 27.653 for 2014.
As of 1 January 2012 there is a limitation for employees that live in the border area of the Netherlands. This is known as the 150 kilometre border rule. The 30% ruling can no longer be requested for employees that lived within 150 kilometres of the Dutch border for more than 16 months during the 24 months prior to their 1st working day in the Netherlands. You can request 30% rulings for employees from Belgium, Luxemburg, North France, large parts of Germany and a part of the United Kingdom. The 150 kilometre border rule is under discussion also due to a recent (non-binding) decision from the European Commission. Therefore it can be advised to file a proforma 30% ruling application anyway with the Dutch tax authorities. Your application will be put on hold pending current court proceedings.
During the validity of the 30% ruling you must check if the employee meets the salary norm. If the taxable wage is lower than this norm the 30% ruling can no longer be applied. And this has to be backdated to January 1st of that year. If the employment agreement ends during a calendar year the salary norm can be prorated accordingly. And if the employee meets the salary norm again at a later stage the 30% ruling cannot be applied again.
For employees that employee that already had a 30% ruling before 1 January 2012 transitional rules apply. The maximum validity of the 30% ruling remains 10 years. Also the moment your employee started working in the Netherlands is important. This could have also been with a different employer.
For all current 30% rulings it’s important to check the salary norm, the end date of the ruling, the 150 kilometre border ruling and if transitional rules are applicable. If you apply it wrongly in the payroll this can result in a wage tax assessment and fines during a payroll audit by the Dutch tax authorities.
Would you like to know more about the 30% ruling? Please contact WePayPeople on +31 (0) 20 820 15 60.
Source: Wage tax manual 2014 Dutch tax authorities
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