Austerity and the 30% rule for employees from abroad
Attracting employees from abroad? The 30% rule allows employers to offer untaxed compensation for the extra costs a foreign employee incurs while working in the Netherlands. This is a targeted exemption of up to 30% of the foreign employee’s wages, including allowances – and applicants do not need to provide evidence. But beware: the 2023 Dutch Tax Plan has announced that the 30% rule will be scaled back. In this blog, I’ll explain all about what the 30% rule entails, how to apply for it, and what austerity means in practice.
By Laura van Alst, HR consultant
What is the 30% rule?
If you, as a Dutch employer, employ people from abroad, you may pay part of their wages untaxed through the 30% rule. To apply the scheme, you must meet the following conditions:
- There must be a formal and contractual employment relationship. The 30% rule does not apply if you hire self-employed workers from abroad.
- The employee has lived more than 150 kilometres from the Dutch border for at least 16 months in the two years before their first day of working with you. The 30% rule does not apply to employees living within 150 kilometres of the Dutch border. This includes all of Belgium, all of Luxembourg, parts of Germany, the northern part of France, and a small part of the UK.
- The employee possesses a specific expertise that is not available or is scarce in the labour market in the Netherlands. This is met if an employee earns at least a certain minimum salary. For 2023, the taxable salary (excluding targeted exempt compensation) is at least €41,954 per year. For employees who are under 30 years of age, a lower standard amount applies: €31,891 per year.
Reimbursement of costs actually incurred
Do you want to reimburse actual expenses untaxed if they exceed 30% of the salary, including allowances? Or would you like to reimburse an employee who does not meet the conditions for the 30% rule? You can, but in that case, unlike reimbursement within the 30% rule, you must provide supporting documents for all costs.
Reimbursement of extraterritorial expenses
If an employee does meet the aforementioned conditions of the 30% rule, you may apply the rule and you can reimburse or provide extraterritorial costs untaxed. This could include costs for:
- Living expenses due to higher prices in the Netherlands than in the worker’s home country.
- An introductory trip to the Netherlands (possibly with family) to look for housing or visit schools.
- Applying for/converting official personal papers, such as a driving licence.
- Medical examinations and vaccinations necessary for staying in the Netherlands.
- Double accommodation such as hotel costs as the worker continues to live in their home country.
- Housing (only those costs that exceed 18% of wages from current employment.
More examples of extraterritorial expenses that you may reimburse or provide untaxed without providing evidence can be found on the website of the Dutch Tax and Customs Administration.
Example 1
The salary including reimbursement is €80,000. The untaxed reimbursement of extraterritorial expenses is a maximum of 30% of €80,000 = €24,000.
Example 2
The salary excluding reimbursement is €50,000. The untaxed reimbursement of extraterritorial expenses is a maximum of 30/70 x €50,000 = €21,429.
Please note: lower gross pay can have adverse consequences
If an employee receives 30% of their income tax-free, 70% of their gross pay is taxed. This means that their gross salary is lower. This can affect pensionable pay, the amount of mortgage interest deduction, and the amount of any benefits such as unemployment benefits.
How do I apply for the 30% rule?
You can apply for the 30% rule using the application form on the website of the Dutch Tax and Customs Administration. If you want the scheme to apply from the first day of your employee’s employment, you must submit your request no later than four months after the start of employment.
Once the Tax and Customs Administration approves the application of the 30% rule, you will receive a final decision with a start and end date. The maximum duration of a decision is five years. In the meantime, employers must regularly check to make sure the employee still meets the income standard.
If you submit your request later than four months from the start of employment, the scheme will only apply from the first day after the month in which you submitted your request. In this case, the duration of the scheme will also be shortened.
Switching employers
If an employee switches employers within the same company group and they also meet the conditions of the 30% rule at the new employer, the already existing decision remains valid. If an employee switches to a new employer outside the company group, you must request permission from the Tax and Customs Administration which will inform you whether the decision remains valid. The new employer must submit this application within three months of the employee ceasing work with the previous employer.
What will change about the 30% rule?
From 2024, the 30% rule will be scaled back to a maximum of the balkenendenorm. The amount of that norm is not yet known for 2024, but in 2023, it will be €233,000 per year. This means that from 2024, you can only apply the 30% rule over the required amount, and you can give a maximum untaxed reimbursement of €66,900 (30% of €233,000).
The government has proposed a transitional arrangement for foreign employees for whom the 30% rule was applied over the last pay period of 2022. For those employees, the cap on the 30% rule will only be applied as of 1 January 2026. For foreign employees for whom the 30% rule is applied from 1 January 2023 or later, the new 30% rule will apply immediately, and the cap will be applied as of 1 January 2024.
Want to know more?
Do you have questions about the 30% rule? Do you need help with your application? Or would you like us to check your application for accuracy? My colleagues and I will be happy to help you. Feel free to call or send me an email.
Laura van Alst, HR-consultant
T +31 (0)316 740131