As an expat paying tax and all the rules regarding working in the Netherlands can be very different than you are used to. The 30%-ruling is such a difference you only face when you are working abroad. The 30% ruling allows employers to designate a portion of the wage as unpaid compensation to certain temporary workers working outside their country of origin. At the request of the Ministry of Finance, last month the 30%-ruling was evaluated. According to the report, the tax regime for the compensation of extraterritorial costs for qualifying employees (expats) is effective on all fronts. But de tax benefits may be seen as over the top. In this blog item, we would like to take you to a number of findings of the report conducted by Dialogic. In this first blog we will tell you everything about how other countries in Europe facilitate their tax legislation regarding 30%-ruling and who are the users of the 30%-ruling.
The Netherlands is not the only European country that has a tax facility for foreign workers. Surrounding countries like Belgium, Luxembourg, Austria, France, United Kingdom, Italy, Switzerland, Ireland and Denmark do also have a scheme for knowledge migrants.
In the Netherlands, as a result of the income standard as a scarcity test, relatively many people qualify for the scheme. Only France and the UK use a ‘smoother’ concept; They apply no scarcity test or what so ever. Belgium and Italy have a similar scope to the Netherlands. Luxembourg has an annual salary of € 50,000 and a minimum of five years’ experience as a standard. And in Austria fewer professions are eligible; only scientists, researchers, artists and athletes are eligible to the 30%-ruling.
Here in the Netherlands users of the 30%-ruling get a fairly highly compensation and the Netherlands is thereby above average. With some may think that a 20%-rule may be a more realistic compensation for extraterritorial costs according to Dialogic. Italy and France are even more liberal. Italy has a 50% scheme (and a potentially higher benefit for non-domiciled residents). France also has a maximum of 50% for a subgroup, but also has a maximum of 30% for employees and self-employed persons who have been recruited abroad by a French company. Austria and Ireland use the same amount of compensation. Both countries also use the 30% as a limit. Belgium, Luxembourg, the UK and Switzerland have a lower remuneration. In Belgium they pay a maximum of € 29,750. Luxembourg has a ceiling of € 80,000 per year (may not exceed 30% of the employee’s fixed annual income). In Switzerland, some states use a maximum of approximately € 1,400.
The number of 30%-ruling users in 2015 was over 56,000. The figure above shows the number of users from 2009 to 2015. There is an increase in the use of the scheme. The average annual growth rate for the 2009-2015 period is approximately 7%. The report says that this increase is mainly due to the number of new users of the scheme.
Most of the 30%-ruling users are male (75%) and are significantly younger than the Dutch labor force. The most common nationality in 2015 was the Indian, followed by British, American and Italian. On average, users of the 30%-ruling are significantly younger than Dutch workers. By 2014, 80% of the users of the scheme were twenty-five or younger. About 55% of Dutch labor in that year was forty-five years or younger.
About 90% of users of the 30%-ruling do have a higher level of education(bachelor, master or PhD). Based on studies of the CBS, we can state that the average level of education of Dutch adults is much lower: approximately 30% of Dutch adults has a higher education.
The term of the 30%-ruling is now up to eight years. The table above shows the distribution of the duration of former 30%-ruling users. This table shows that only a limited number of users (less than 10%) have used the full term of the scheme. About 70% of users have used the scheme for four years or less.
In part 2 we will continue reviewing the 30%-ruling report conducted by Dialogic. In that part, we will mainly focus on which nationalities particularly use the 30%-ruling and in which professions it is most commonly used. Would you like to know more about the 30%-ruling? Don’t hesitate to contact us, send us an email at [email protected] and we’ll answer any questions you might have. Do you want to read more about the 30%-ruling? Read our page about the 30%-ruling in the Netherlands for more information about conditions and financial consequences.
*For more information about the report you can visit the website of Dutch government. You can read the full report here, but be aware the report is written in Dutch. For more information, contact us at +31 20 820 15 60.
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