Netherlands: Follow-up on “30% ruling,” tax relief for certain employees

Netherlands: Follow-up on “30% ruling,” tax relief

The Advocate General of the Dutch Supreme Court on 9 October 2015 issued an opinion concerning whether the 150-kilometer requirement for application of the “30% ruling” is contrary to EU law. The Advocate General concluded there was no systematic and clear overcompensation to employees, and consequently no violation of EU law.

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Elements of the “30% ruling”

The “30% ruling” involves a fixed allowance paid to compensate for the costs of an employee’s temporary stay outside the country of origin (extraterritorial expenses). 

Foreign employees with specific expertise that is scarce in the Dutch labor market, subject to certain conditions, are eligible for tax relief under the “30% ruling.” If the 30% ruling is applicable, 30% of the employee’s salary can be paid as a tax-free allowance. The remaining 70% is the amount of salary that is subject to tax in the Netherlands. 

As of 1 January 2012, only employees who resided more than 150 kilometers from the Dutch border during at least two-thirds of the 24 months preceding the commencement of their employment or secondment in the Netherlands are eligible for the “30% ruling.”

Prior judicial action

In February 2015, the Court of Justice of the European Union (CJEU) found that the 150-kilometer criterion in the current 30% ruling is not contrary to EU law—provided there was a systematic clear overcompensation of the actual extraterritorial expenses incurred by the foreign employee. 

With this finding, the case required consideration by the Dutch referring court, the Dutch Supreme Court (Hoge Raad der Nederlanden).

Advocate General’s opinion

With the recent opinion of the Advocate General, who concluded that the appeal before the Dutch Supreme Court was unfounded, employees who resided no more than 150 kilometers from the Dutch border during more than one-third of the 24 months preceding the commencement of their employment or secondment in the Netherlands are no longer eligible for the “30% ruling.” 

If the Dutch Supreme Court follows the Advocate General’s opinion, this group of employees would no longer be able to take advantage of the 30% ruling.


Read an October 2015 report prepared by the KPMG member firm in the Netherlands: Opinion rendered by Advocate General Niessen on whether the 150-kilometer criterion in the 30% ruling is contrary to EU law

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