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Umbrella Company and the Dutch 30% ruling

Due to a special clause for foreign employees, the Dutch tax system incorporates a substantial allowance for tax-free income. Commonly known as the Dutch 30% ruling. This clause was for instance designed as an incentive for foreign nationals with expertise in specific fields that were scarce on the Dutch labour market. So, the specialists are encouraged to work in the Netherlands.
The 30% ruling in the Netherlands allows expatriate workers in the Netherlands to receive a 30% tax-free remuneration. Dutch Umbrella Company can seamlessly integrate the Dutch 30% ruling into the services it provides to expatriate contractors. So, they reap the full benefits of the Dutch tax system without any additional effort on their part.

What are the conditions of the 30% ruling in The Netherlands?

In order to benefit from the Dutch tax system, several conditions must met. In the first place, any expatriate contractor wishing to make use of the Dutch 30% ruling must be employed in the Netherlands.

Secondly, their employer must be able to justify the application of the Dutch 30% ruling by demonstrating that the position filled by the expatriate employee requires specialized knowledge not available on the Dutch labour market.

The maximum period for the Dutch 30% ruling is a period of 8 years. Umbrella Company therefore advises expatriate contractors to assess their situation as quickly as possible in order to take full advantage of the potential benefits of the Dutch 30% ruling.

What are the financial consequences of the Dutch 30% ruling?

The 30% ruling does not offer a 70/30 split of gross salary into taxable and non-taxable income. Instead, employees who use the 30% ruling receive 70% of their gross salary as total taxable income. The 30% referenced in the ruling will be paid as additional tax-free remuneration. This leads to a tax benefit for employers and a higher net income for employees eligible for the 30% ruling.
However, the Dutch tax system calculates employee benefits, such as pension, based on a person’s total gross salary. As only 70% of the income earned under the 30% ruling consists of taxable salary, electing to use the 30% ruling diminishes the benefits one may accrue.
Due to our experience, we are familiar with the Dutch tax system and all related legislation. Our specialized knowledge of the Dutch 30% ruling uniquely qualifies us to offer umbrella company services to expats working in the Netherlands.