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Pitfalls 30%-ruling in Dutch payroll

The 30% ruling is a tax benefit for employees from abroad who temporarily work in the Netherlands, provided they meet the conditions. In this article we will not discuss the regular conditions to be eligible for the 30% ruling, but rather a number of important points of attention when applying the 30% ruling.

Below are a number of tips that can help you apply the 30% ruling correctly:

1. Periodically check if the employee still meets the conditions

When applying in the payroll, there is a continuous test of the 30% ruling and that especially around the salary requirement. This formally means that when an employee no longer meets the salary requirement, the 30% ruling lapses. This can occur, for example, when the salary limit of the 30% rule is indexed at the beginning of the year and the employee's salary remains the same and is therefore too low. Furthermore, a person may, for example, start working part-time, as a result of which the taxable salary on an annual basis no longer meets the salary requirement. 

Therefore, check periodically, but formally every month, whether the employee's salary still meets the requirements before applying the rule. 

2. Change of employer (within the group)

In order to apply the 30% ruling, an approval letter from the Tax Office for applying the 30% ruling must be present in the file. A letter of approval from the Tax Office lists the name of the withholding employer and a payroll tax number, including the period during which the 30% ruling applies. If a person is given an employment contract with another entity within a group context, the withholding employer often changes. We often see this in practice in acquisitions and mergers as well. The new 'employer' often has a different payroll deduction number than the one listed on the 30% ruling. It is then necessary to have the 30% ruling converted through a new application to the Tax Office. If there is an SGI this is exceptionally not necessary. 

3. There may also be a lower percentage than 30% benefit

When applying the 30% ruling, an employer may give a tax-free (net) reimbursement of up to 30% of taxable wages. The salary limit that applies is the minimum amount to be calculated as taxable wages. For someone under 30 with a qualifying master's degree, a lower salary requirement may apply. It often happens that employees are eligible for the 30% rule, but do not earn enough in terms of salary to use the maximum benefit of the 30% rule. In these cases, it is important to calculate on a monthly basis what percentage can be applied. In addition, it is important to manage the employee's expectations properly in those cases. 

4. No 30% application in case of work exemptions and severance payments

The 30% ruling may only be applied to wages from current employment and not to wages from previous employment. In case of a period of complete exemption from work or 'garden leave' and a severance payment, the 30% ruling may not be applied. If there is no full exemption from work, there are still possibilities to apply the 30% ruling under certain conditions.

5. Take into account the maximum duration

The 30% ruling has a maximum duration of five years. Take this into account and make sure to stop the regulation in time when the maximum duration has been reached.

Incorrect application of the 30% ruling can lead to dissatisfied employees and additional taxes and fines during a payroll tax audit. If you have questions or doubts about the correct application of the 30% ruling within the payroll administration, please feel free to contact us.

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