The 30% ruling is one of the most well-known tax benefits in the Netherlands for expats and international employees. This scheme is designed to make it more attractive for foreign workers to come to the Netherlands for work. In this blog, we take a look at the history of the 30% ruling, its original purpose, and how it has evolved over the years. We also discuss the impact of the scheme on both employees and employers.
What is the 30% ruling?
The 30% ruling allows foreign employees relocating to the Netherlands for work to receive up to 30% of their gross salary tax-free. This tax-free portion is intended as compensation for the extra costs incurred when moving from abroad to the Netherlands. These costs include housing, relocation, and other additional expenses (extraterritorial costs).
The scheme is attractive to both employers and employees. Employers can attract talent from abroad without needing to compensate with higher gross salaries, while employees benefit from significant tax savings.
How to apply for the 30% ruling
To apply for the 30% ruling, you must meet certain conditions, such as a minimum salary and having lived outside a 150-kilometer radius from the Dutch border in the 24 months prior to employment. Want to know how to navigate this process? Learn more about our tax advisory services and contact us for guidance.
The origin of the 30% ruling
The 30% ruling originated in the 1960s. During this period, the Netherlands was developing into an international trade hub, and there was a clear need for specialized labor from abroad. The government introduced a tax scheme to offset the additional costs incurred by foreign employees, then referred to as “extraterritorial costs.”
Over the years, the conditions and percentages of this scheme have been adjusted several times. However, the original goal remained unchanged: to make the Netherlands attractive to international knowledge workers and talent.
How the scheme has evolved over the years
The 30% ruling has undergone various reforms. Here are some of the key milestones:
- 1960s: The foundation for the scheme was laid with a tax exemption for specific costs incurred by expats. No fixed percentage had been established at this point.
- 1990: The scheme was structured, and the fixed percentage of 30% was introduced. This provided more clarity and consistency.
- 2012: Stricter requirements were introduced, including a salary threshold. This meant that only employees earning a minimum salary qualified. The maximum duration of the scheme was reduced from 10 to 8 years.
- 2019: The maximum duration was further shortened from 8 years to 5 years. This was in response to political pressure to reduce the costs of the scheme for the government. Additionally, employees who had applied earlier were compensated through a transitional arrangement.
The purpose of the 30% ruling
The primary purpose of the 30% ruling is to enhance the Netherlands’ competitiveness in the international labor market. By offering an attractive tax scheme, it becomes easier for companies in the Netherlands to attract highly skilled workers from abroad. This is particularly important in sectors such as technology, science, and finance, where the shortage of local specialists is significant.
Additionally, the scheme supports the Dutch knowledge economy. International employees often bring unique expertise and skills, contributing to innovation and economic growth.
Criticism and adjustments
Although the 30% ruling is highly valued by companies and expats, it has also faced criticism. Opponents point to the costs for the government and the inequality the scheme can create between local and foreign employees.
In recent years, various reports have highlighted that the scheme mainly benefits higher-paid employees. This has led to stricter requirements, such as the salary threshold and the reduction of the duration. A recent report by the CPB (Netherlands Bureau for Economic Policy Analysis) emphasized the need to make the scheme more effective without losing sight of its original purpose.
How is the scheme used today?
As of 2025, the 30% ruling remains a key pillar of Dutch policy for attracting international talent. Employees must meet strict criteria, including:
- Salary requirement: In 2025, the minimum salary is set at €41,954 per year (for employees under 30, this amount is lower).
- Foreign residency: Employees must have lived at least 16 months outside a 150-kilometer radius from the Dutch border in the 24 months prior to their employment.
How Practical can help
At Practical | Excellence in Finance, we provide comprehensive support for applying for the 30% ruling, as well as tax advisory, payroll administration, and financial advice. Our experts not only assist with completing the necessary forms but also offer proactive advice to ensure your administration is fully compliant.
Check out our client cases to see how we help entrepreneurs obtain real-time information and make better business decisions: Practical client cases. With four offices in Amsterdam, Rotterdam, Eindhoven, and Maartensdijk, we are ready to support you.
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