30% Allowance rule
The 30% allowance rule is a fiscal compensation for employees hired from abroad and in possession of a scarce specific expertise (“schaarse specifieke deskundigheid”). These employees fall under the extraterritorial expenses (“extraterritoriale uitgaven”) in the Netherlands. The 30% allowance rule allows you, under specific circumstances, to pay your employee up until 30% in net wages. This allowance also applies to remuneration in kind. Do keep in mind that the application of the 30% allowance rule also lowers the basis of your social security premium.
The application
The application needs to be done in writing by both the employer and employee. It is, thereby, of importance that there is also an agreement in writing, signed by both the employer and employee, on the consequences of the application of the 30% allowance rule.
The disposition
As soon as the Dutch tax authorities (“de belastingdienst”) grant the 30% allowance rule, you will receive a disposition. This disposition, as mentioned above, allows you to grant your employee up until 30% in net wages. You are allowed to apply the allowance rule in your payroll administration before receiving this disposition. However, should the Dutch tax authorities not grant you the 30% allowance rule, you must recalculate your employee’s payment without the application of the 30% allowance rule.
Compensation for (extraterritorial) costs
If you apply the 30% allowance rule, you are not allowed to apply another separate tax-free compensation next to the allowance rule. You can apply a tax-free compensation for the tuition fee of the international school for your employee’s children, but only if this is regulated in the Work-Related Expense Scheme (WKR).
Ineligible employees
When your employee is not eligible for the 30% allowance rule (because, for example, your employee’s salary is not eligible), it is still possible to grant your employee a (partly) tax-free compensation for specific extraterritorial costs like, for example, a costs of living allowance or a high living costs compensation.