When granted, the employer is allowed to pay a maximum of 30% of the agreed compensation package to the employee as a tax free allowance for up to 8 years. This benefit can be calculated as follows:
Agreed compensation package: 100,000.
|Without 30% ruling|
|Less: wage tax||
|Effective tax rate||45%|
|With 30% ruling|
|Less: tax free allowance||30,000 -||2,500 -|
|Less: wage tax||29,400 -||2,450 -|
|Add back: tax free allowance||30,000 +||2,500 +|
|Effective tax rate||29,4%|
|With 30% ruling||70,000||5,883|
|Less: without 30% ruling||55,000 -||4,583 -|
Partial non-resident taxpayer:
With the 30% ruling, the employee can choose to be treated as a partial non-resident taxpayer, even though he actually lives in the Netherlands. As a partial non-resident, the employee will be considered a resident taxpayer for box 1 (income from employment and home ownership). However for income from box 2 (income form a substantial interest in a company) and box 3 (income from savings and investments) the employee will be considered a non resident-taxpayer.
As a result, the income that should be reported in box 2 and box 3 will be very limited. For instance, in box 3 in practice only real estate in the Netherlands that is not used as a main residence should be reported. All other passive income remains tax free.
Employees who have the 30% ruling and who are living in the Netherlands are entitled to the same personal allowances and tax credits as residents of the Netherlands. A request to the tax authorities to be treated as a partial non-resident taxpayer can be filed with the income tax return for the year concerned. The choice can be revised every calendar year.
The partial non-resident taxpayer is in principle also subject to Dutch estate and gift tax.
If a US citizen opts to be treated as a partial non-resident of the Netherlands, then he / she can exclude employment income from Dutch taxation. The exclusion applies to any employment income that can be allocated to days worked outside of the Netherlands, e.g. the days worked in other European countries, in Asia, the America's, etc. Consequently, you are only subject to Dutch taxation on employment income allocated to days you physically performed services in the Netherlands (i.e. Dutch workdays).
The amount of exclusion is determined based on a fraction which takes into account the total number of non-Dutch workdays over the total amount of actual workdays for the year. In this respect, vacation days are not counted as workdays but sick-days and weekend workdays are.
US citizens who are statutory directors:
The above mentioned allocation of income between Dutch and non-Dutch workdays generally only applies to employees. For statutory directors, the exclusion is, in principle, limited to income allocated to days worked in the US. All other workdays are subject to taxation in the Netherlands.