Understanding the Dutch 30% Rule
Disclaimer: This is not legal nor financial advice. Consult your lawyer.
Foreigners working in the Netherlands benefit from a tax exemption on 30% of their salary. There are certain conditions to be eligible for this. You can find them online.
One of the most confusing elements of the rule is how to calculate the net salary. This is what I am trying to explain in this post.
What the 30% rule means?
It means if your annual salary is EUR 100,000. 30% of it which is equal to 30,000 won’t be taxable. You will just get it as is.
The remaining 70,000 will be treated as if this is your base salary. You will pay taxes accordingly.
The minimum salary requirement
To be eligible for the 30% rule you have to meet this condition
The annual taxable salary for an employee must be more than EUR 36,889.
Remember: TAXABLE SALARY. This is the remaining of your salary after you cut 30% of it. It has to match or be higher than the that number.
Things get interesting
Salaries in the Netherlands aren’t that high. So recruiters will tell you that because you are a foreigner you will benefit from the 30% rule. While this is technically true, most of the times you won’t be benefiting completely from it.
Suppose you got an offer from a company for EUR 45,000. You got the government approval for the 30% rule.
- 30% * 45,000 = 13,500. The tax free part which you will get as is.
- 70% * 45,000 = 31,500. The taxable salary. This is smaller than the above mentioned minimum.
Here is what accountants and companies do. If your taxable salary won’t match the minimum salary requirement. They will take part of the non-taxable salary and add it to the taxable one until it meets the minimum. Here is how it works for the above example.
Remember: The minimum for 2016 is 36,889.
- Taxable: 36,889.
- Non-taxable: 45,000–36,889 = 8,111 EUR. This is the amount you will get as is.
In the above mentioned example, you are only getting 18% of your salary exempted from taxes. Not 30%.
If you want to benefit completely from the 30% rule. Your gross salary has to be greater than
- (The Minimum Taxable Salary of the year) * 10 / 7.
- 36,889 * 10 / 7 = 52698.60 EUR. For 2016.
I hope this helps. If you have any questions let me know in the comments.
Thanks to Booking.com finance guy who spent almost half an hour explaining this to me & answering my stupid questions. And thanks for Abdelhameed Torky who encouraged me to write this.