Hiring international employees to work for and/or with you in the Netherlands is not only a great opportunity for you as an employer, but also the government is happy to have you on board. Your employee has a greater chance of receiving the 30% ruling, which has a huge effect on their net income.
In our experience, we know that the 30% ruling is a complex issue. Not only the results of the ruling conditions, but also to know and understand when and how to apply for it. In this article we would like to give you some insight, examples and options, so you can utilize this amazing opportunity and make it work to your benefit and your employee’s.
The 30% ruling is for expat employees with a highly recommended skill set. The 30% ruling is an advantage on the salary where 30% of the normally taxed salary will now be paid non-taxed to the employee. For example: he or she earns gross EUR 10.000,00, you will get EUR 3.000,00 Euro non-taxed and EUR 7.000,00 Euro will be taxed as normal.
The regulation states that the employer may reimburse 30% of the gross wage in addition to the regular wage amount as compensation for the extra costs incurred by working or moving to the Netherlands. It is not important whether these costs are actually incurred, the allowance is a lump sum.
There are some requirements from the Tax Authorities to determine if your employee would be eligible for this application:
Recruited from abroad means that at the time of signing the agreement between you and your employee, the employee is not physically in the Netherlands. Most of the time you as an employer would like to sign the agreement at an office or together in person. At this time the confirmation that you will hire this person and that you both agree with all the terms and conditions needs to be proven/stated and the employee needs to be in a country other than the Netherlands.
A tax advisor, the employee or you as an employer can apply for this arrangement. At the end of the process the employer needs to approve the application. Most of the time the employer, or your tax company files the application for the employee.
In 6-7 weeks, the applicant will receive the granting letter if all is submitted correctly. Over the next 5 years of the employment, the employee can use the 30% ruling on their salary. The applicant needs to apply within 4 months of the first start date of an employment in the Netherlands.
For you as an employer it is important to have a copy of the granting letter from the Tax Authorities in your files to determine if it applicable and to be aware of the duration.
It could be that the employee earns less than the required income, it could be that the 30% ruling does not apply to the employee at all, or that it does not cover the full 100% of the income. Either way it is important to inform the payroll administrator about the 30% ruling so it can be processed in the correct way in the administration.
Also an extra agreement with the employee in regards to this application is important to have. We advise to add an extra clause in the employment agreement.
If you use our payroll services, TOSS will act on your behalf as the legal employer for your employee. We will apply for your employee, and making sure that you and the employee receive all the benefits that are applicable in your particular situation.
At this point there is nothing we need anymore from you. We will contact the employee directly and will request all necessary information. Of course we will inform you in the process.
There are two options:
Maybe after this article you understand the difficulty about this application a little bit more. Although we at TOSS are very experienced in these applications we also hire a tax advisor to apply for us. Not only to make sure we do it in the correct way, but also because they have a special arrangement with the Tax Authorities so we could have the granting letter earlier then the 6-7 weeks.
Most of the time the start date is already passed when we receive the granting letter. Since it is logical that the employee would like to receive his salary immediately, we process the salary in the period until receiving the granting letter without the 30% ruling.
Once we have the letter in our possession we process the 30% ruling retroactively from the start date of the employment agreement.
We were doing business in the Netherlands for 1 or 2 years and at the moment that we also wanted to settle our company and hire people, we were happy that we were introduced to TOSS In Holland. They assisted us with the registration of the company, the payroll and they found a really good candidate for us. If TOSS was here 2 years ago, I think it would have made our life way easier!
As The One Stop Shop, TOSS offers a wide range of services for expats and/or their employers in the field of living and working in the Netherlands with the aim of making every related process as smooth and effective as possible.
We have over 20 years of experience and we have carefully built up an extensive global network of specialists to serve you. All our team members are specialized and educated with all needed payroll certificates and our services meet the (inter)national standards.