30% ruling under fire?

30% ruling under fire?

Paid partnership

BDO is a global top-five accounting firm, with more than 2.000 skilful and experienced employees in the Netherlands. Femke Bakker from BDO tells us about the evaluation of the 30% ruling.

The 30% ruling has been with us for a long time. The predecessor of the 30% ruling had already been created shortly after the Second World War to help attract investors and highly educated individuals to the Netherlands. It was secretive at first and only published in the 1980s.

After all these years, the 30% ruling is still very popular amongst expats. The 30% ruling enables employees who are hired from abroad and with specific expertise to work in the Netherlands under favourable tax conditions. An employer can provide such an employee with 30% of their wage free of taxation, provided certain conditions are met.

The 30% reimbursement is intended to cover the extra costs (extra-territorial costs) incurred due to the fact that one is working outside one's country of origin.

The 30% ruling has been the subject of discussion for a while now. Last year, the Dutch Court of Auditors advised the (now outgoing) Cabinet to research the effects of the 30% ruling on a regular basis.

During the discussion in the House of Representatives, a motion was passed urging evaluation of (the necessity of) the 30% ruling. Consequently, the Ministry of Finance conducted a review of the 30% ruling. The results were published in a report which was offered to the Second Chamber of Parliament on June 13, 2017.

Evaluation 30% ruling vs. extra-territorial costs

The main aim of the report was to evaluate the correlation between the fixed 30% tax-free amount and the actual extra-territorial costs made by expats.

Does the 30% ruling lead to a (much) larger net amount than needed to cover the actual costs? According to the report, on average an expatriate employee endures about 29% of his or her remuneration as extra-territorial costs.

However, when limiting the review to those qualifying for the 30% ruling, this percentage drops to 20%. The reason for this is that people with higher wages spend a lower proportion of their remuneration on extra-territorial costs.

For expats with a lower income (those without the 30% ruling), the opposite applies: they spend a higher part of their remuneration on extra-territorial expenses. In these cases, it could be more beneficial to reimburse the actual extra-territorial costs.

However, research has shown, that even in those cases, the 30% ruling is still preferred for the sake of efficiency.

Efficient and effective

The report concludes that the 30% ruling is generally both efficient and effective. Effective because it reduces the administrative burden (for employers, employees and tax authorities) due to the fact that the 30% ruling is simple, transparent and predictable.

Furthermore, it attracts highly educated individuals who are scarcely found on the Dutch job market. It even seems the 30% ruling does not threaten Dutch job searchers, mainly because the 150-kilometre limit prevents marginalisation in the border regions.

Last but not least, it creates an attractive and competitive business climate in the Netherlands. The 30% ruling was deemed efficient as well.

If the 30% ruling would be abolished and instead the actual extra-territorial costs were reimbursed this would lead to a significant overall loss of revenue for the tax authorities.

Proposed changes

Enough reasons for retaining the 30% ruling in the future, we would say. However, the report does suggest certain modifications of the 30% ruling, which could have a positive effect on the effectiveness and efficiency of the 30% ruling.

The suggested modifications are as follows:

  • Reduction of the maximum duration from 8 to 5 or 6 years.
  • Increase of the distance of 150 kilometres from the borders of the Netherlands.
  • Gradual decrease of the 30% allowance for employees with a gross annual income exceeding 100.000 euros.

Simultaneously another report was published by the Netherlands Foreign Investment Agency (NFIA), in which they came to the same conclusions.

Will changes be made?

The 30% ruling is an important part of the reason the Netherlands has an attractive business climate, which makes the abolishment of the 30% ruling undesirable to say the least.

Whether or not the report will lead to a legislative proposal to change the conditions of the 30% ruling remains to be seen. Especially since the Netherlands is currently going through a formation period to establish a new government.

For more information about BDO and its services, call +31 20 36 34 251 or fill in the contact form below.


Femke Bakker


Femke Bakker

Femke Bakker is working at the Amstelveen office of BDO. After studying international tax law at the University of Amsterdam she specialized in the international income and wage taxation. As...

Read more



Leave a comment

malaksamir 19:31 | 5 May 2018

Hi Femke Do you think even if new decision is made it will be retroactive? In other words it could affect the people who already have 30% granted ?

FemkeBakker 22:17 | 7 May 2018

The current information states that the reduction of the period during which the 30%-ruling can be applied from 8 to 5 years, will both affect current and rulings. It could affect the people whom already have a 30%-ruling. It is expected that around the third Tuesday of September, the first legislative proposals will be published and at that time more clarity will be provided.