30% Ruling (Netherlands)

The 30% Ruling is a Dutch tax incentive designed to attract and retain highly skilled foreign employees recruited from abroad. Under this scheme, qualifying employers are permitted to pay an employee a tax-free allowance of up to 30% of gross salary to cover extraterritorial relocation costs. This allowance is withheld from taxable income, effectively reducing the employee's tax liability. Eligibility criteria include recruitment from abroad (typically with non-Dutch residency in the prior two years), a job requiring specific expertise, and a minimum taxable salary threshold of approximately €46,000 (as of 2024, indexed annually). Eligible employees must be non-resident in the Netherlands for at least 24 months immediately preceding appointment. The ruling was originally valid for 8 years and later extended to 10 years, but reforms enacted in 2024 reduced this to 5 years. Notably, the scheme incorporates a phased reduction: beneficiaries receive the full 30% allowance for the first two years of eligibility, 20% in years three and four, and 10% in year five. This gradual reduction encourages integration into Dutch society and the local tax base. A partial non-residence option (available under earlier versions) that permitted qualifying individuals to remain non-resident for Dutch income tax purposes while claiming the allowance was discontinued effective 2025. Now, the allowance applies only to individuals establishing Dutch tax residency. The 30% Ruling remains one of Europe's most competitive tax incentives for skilled expat recruitment, though the 2024 reforms significantly curtailed its duration and phase-down structure compared to pre-reform terms.