The three month term of the 30 percent ruling

General: the 30% ruling

The 30% ruling is a tax advantage for foreign employees working in the Netherlands. If and when the legal requirements are met, the employer is entitled to grant the employee a tax free allowance amounting to 30% of the salary subject to Dutch payroll tax. This tax free allowance is considered to be compensation for the expenses a foreign employee has for working outside his home country.

In principle the employer can reimburse the employee’s extra territorial costs tax free after the employee has submitted the relevant receipts and they have been checked and approved by the employer. This requires a lot of work on the part of both the employer and the employee. Therefore, to make things easier employer and employee can request the Tax Office to grant the employee a 30% for his activities for the employer. This way the employer can pay the employee a tax free allowance of (roughly speaking) 30% of his salary.

The requirements for an employee to receive a 30% ruling are as follows: The expat must be an employee that was employed in another country by an employer or was assigned to an employer within the same group of companies. The employee has to have been working at management level and have specific expertise that is scarce or absent on the labour market in the Netherlands.

Specific expertise
For the evaluation of whether an foreign employee possesses specific expertise that is scarce or absent on the Dutch labour market, a minimum salary requirement applies. For 2014 this is:
– general: € 51,969 gross.
– for employees under the age of 30 with a masters degree from a foreign university: € 39,505 gross.

The required salary amounts can change every year based on the applicable index rates.

Distance requirement
Foreign employees working in the Netherlands must have lived more than 150 km from Dutch border before their employment in the Netherlands commenced.

Three month term
One of the conditions of the 30% ruling is that if an employee changes jobs within the timeframe of the duration of the 30% ruling (8 years), such a job change has to take place within three months. This follows from a ruling by the Supreme Court of the Netherlands.

The 30% ruling can be applied to any employment relationship. However, these employment relationships do have to have succeeded each other.

The case
The case before the Supreme Court regarded an employee of Belgian nationality, residing in his home country. On April 15th, 2001 he went to work for an employer located in the Netherlands. For this particular employment relationship the employee, together with his employer, applied for a 30% ruling. This 30% ruling was granted by the tax authorities for the duration of 10 years. On April 1st, 2009, the employee resigned from his job and became a member of the Supervisory Board of a Dutch company. For this position a 30% ruling was also applied for and granted until March 31st, 2011. As of June 2010 the employee also accepted a position on the Supervisory Board of another company. Again he applied for a 30% ruling. This time however, it was refused by the Tax Authorities.

The three month term
The Supreme Court ruled that the refusal by the Tax Authorities to grant yet another 30% ruling was correct. The Supreme Court referred to the three month term that applies if an employee enters into service with another employer. The Supreme Court ruled: "The final sentence of the 1 subsection stipulates that a request regarding continuation of the rule of evidence cannot take place if an employee has taken longer than three months to find a new job. The reason for this is that the expertise of the assigned employee is apparently less scarce than was first thought as a result of which he no longer qualifies of application of the rule of evidence, while on the other hand, with regard to the new employer, the employee also no longer qualifies as an assigned employee."
The important facts to remember

Aside form the three month term the law also determines that if an assigned employee accepts a new position with another employer during the term of the 30% ruling, the 30% ruling may still apply for the remainder of the term granted if:
" both the (new) employer and the employee apply for continuation of the 30% ruling with the Tax Authorities;
" The new employer makes plausible that the employee can be deemed to be an assigned employee.

For more information on these issues you could contact one of the International Desk attorneys of Boels Zanders Advocaten.

Manon Maarschalkerweerd

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