The 30% ruling is a tax-free allowance available to certain employees who move to the Netherlands. It is intended to cover all their ‘extraterritorial expenses’, such as additional expenses incurred when living outside their home country, including accommodation, etc. This 30% ruling can mean that the employee receives a much higher net salary and that the employer’s costs are reduced.
Fixed tax-free allowance
Which extraterritorial expenses does this ruling cover?
- travelling expenses from and to the home country;
- higher living expenses;
- double housing expenses;
- the cost of applying for a residence permit;
- the cost of changing official documents (excluding work permit);
- the cost of a language course.
The 30% ruling is granted for no longer than five years (60 months). This period may be reduced by the length of earlier periods spent living or working in the Netherlands.
Payroll processing end 30% ruling during period
The taxable moment determines whether the 30% ruling can be applied. Once it is established that the 30% ruling indeed can be applied, the question arises as to what the basis of the 30% allowance is.
Recently, the Knowledge Group International Tax Law for individual income tax has taken a position on the application of the 30% ruling in the payroll administration when the 30% ruling duration period ends during the month (wage period). This applies to situations in which the maximum duration period (maximum 5 years) has ended, which is the end date as stated in the 30% ruling granting letter.
Read more here.