Starting

Payroll taxes are withheld in the Netherlands from the gross wages of employees. This is calculated using progressive rates. The tax rate can be up to a maximum of 52%.  

The government has created the 30% ruling to create a favorable tax regime, and thus attract foreign highly educated employees to the Netherlands. 

The employee is only taxed on 70% of his or her total employment income. This results in a significant reduction of the effective tax due. This calculation effectively lowers the maximum tax rate to 36,4%. 

The conditions

The 30% ruling in the Netherlands generally applies to employees recruited from abroad for the purpose of employment in the Netherlands. However, there are some conditions that apply to said employees in order to qualify for the 30% ruling.  

The most important of these is that the employee must be employed by an employer in the Netherlands. Another critical qualification for the Dutch 30% ruling that the employee must have is that he must have specialized niche skills or knowledge that is not readily available in the Dutch labor market.  

• The duration of the 30% ruling is a maximum of 5 years; 
• There are minimum salary requirements based on age (under and over 30); 
• Persons working within a radius of 150 km from the Dutch border are not eligible for the Dutch 30% ruling.  

Through the salary administration processing, the Tax Authorities are able to continuously review the salary levels. If these are not met, the subsequent 30% ruling in the Netherlands expires at that time.  

As a result, under these circumstances, the Tax Authorities can retroactively submit an additional attempt to recover the payroll tax that was erroneously not withheld up until this point. 

Processing in the administration

As can be seen, the correct processing is complicated and also certainly mandatory. This is not always easy to carry out. Our advice is therefore to outsource the processing of the payroll to a qualified payroll processor. What is a big plus is if this payroll processor also has international knowledge. 

The application itself can sometimes be done by the payroll processing company, but it is often useful to engage a specialized tax advisor for this application.