The 30% rule is a tax benefit for employees from abroad working temporarily in the Netherlands, provided they meet the conditions. In this article, we will not discuss the regular eligibility requirements for the 30% rule, but rather a number of important points to consider when applying the 30% rule.
Below are some tips that can help you apply the 30% rule correctly:
1. Periodically check whether the employee still meets the requirements
When applied in payroll, there is a continuous test of the 30% rule and that especially around the salary requirement. This formally means that when an employee no longer meets the salary requirement, the 30% rule 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 too low as a result. Furthermore, for example, a person may start working part-time, which means that 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 you apply the rule.
2. Change of employer (within corporate group)
In order to apply the 30% rule, an approval from the Inland Revenue to apply the 30% rule must be on file. A letter of approval from the Inland Revenue lists a name of the withholding employer and a payroll tax number, including the period during which the 30% rule applies. If a person within a corporate group gets an employment contract with another entity, 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 tax number than the one listed on the 30% ruling. It is then necessary to have the 30% rule converted through a new application for the 30% rule with the Tax Office. If there is an SGI then exceptionally this is not required.
3. There may also be a lower percentage than 30% benefit
When applying the 30% rule, an employer may provide 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 those 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 well in those cases.
4. No 30% application for work exemptions and severance payments
The 30% rule may only be applied to wages from current employment and not to wages from past employment. During a period of complete exemption from work or “garden leave” and with severance pay, the 30% rule may not be applied. If there is no full work exemption, there are still options for applying the 30% rule under certain conditions.
5. Keep in mind the maximum term
The 30% rule has a maximum duration of five years. Keep this in mind and make sure you stop the arrangement in a timely manner when the maximum term is reached.
Misapplication of the 30% rule can lead to disgruntled employees and additional taxes and fines in a payroll tax audit. If you have questions or doubts about the proper application of the 30% rule within the payroll system, please feel free to contact us.
