The Dutch 30% Ruling (Expat Scheme) Explained

For foreign employees temporarily working in the Netherlands, the expat scheme (30% facility or 30% ruling) offers a valuable tax benefit. This article explains how the 30% ruling works in practice: who qualifies, how to apply, and what to expect in the future. The scheme allows eligible employees to receive a tax-free allowance of up to 30% of their salary for a maximum of five years, provided they meet specific conditions, including a minimum salary threshold. 

What are extraterritorial costs under the Dutch 30% ruling?

 In the Netherlands, extraterritorial costs refer to the additional expenses that foreign employees may incur due to working and living outside their home country. Examples (not limited) of extraterritorial costs are:

• Double housing costs (e.g. hotel expenses if the employee continues to live in the country of origin)
• Travel expenses to the country of origin (e.g. for family visits)
• The costs for an orientation trip to the Netherlands, possibly with the family, for example to search for a home or a school.

How employers can reimburse extraterritorial costs tax free

Extraterritorial costs can be reimbursed tax-free by employers, either as part of the 30% facility or through actual cost reimbursement. Each year, the employer must choose whether to apply the 30% facility or to reimburse the actual extraterritorial costs tax-free.

The actual extraterritorial costs can only be reimbursed tax-free, as long as proper receipts are provided by the employee. The employer keeps the receipts in the employee files.

Under the 30% facility, the employee doesn’t have to provide the receipts. This saves the employer and employee administrative work.

How the Dutch 30% facility works

The tax-free allowance can cover up to 30% of the employee’s Dutch taxable salary, reducing the taxable portion significantly. However, it’s important to note that the remaining taxable salary must not fall below the salary threshold. For employees earning less than 100/70 of the threshold, the tax-free allowance will be less than 30%.

Conditions for applying the 30% ruling in the Netherlands

• The scheme applies only to employees who are employed by a Dutch employer.
• The employee must possess specific expertise that is scarce in the Dutch labor market. Specific expertise is demonstrated through an income threshold. This threshold is determined annually. For regular incoming employees, the income threshold in 2025 is:

• • • General: Annual salary (excluding tax-free allowance) must exceed €46,660.
    • Under 30 years old with a master’s degree: Annual salary must exceed €35,468.

• In the 24 months prior to the first working day in the Netherlands, the employee must have lived for more than 16 months at a distance of more than 150 kilometers (as the crow flies) from the Dutch border.
• The employer must submit an application to the Dutch Tax Authorities together with the employee and receive a formal decision stating that the scheme may be applied.

Limitations of the 30% facility

The 30% facility is valid for a maximum period of 5 years. This means that an employee who meets all the conditions can benefit from the tax-free allowance for extraterritorial costs for up to five years. For employees who already made use of the scheme before 2023, transitional rules apply. These employees may be subject to a different duration of the scheme.

As of 2025, the tax-free allowance is capped at €73,800 for salaries up to €246,000 annually. This aligns with the Standards for Remuneration Act (WNT), which applies to top salaries. However, there’s good news for expats who were already receiving the tax-free allowance before January 1, 2023: for them, the cap does not apply in 2025.

Recent developments to the Dutch 30% ruling

The 30% facility has been a popular subject to debate in recent years. There is strong demand for the expat scheme from the business community. The scheme helps attract urgently needed, highly educated employees.

From a budgetary perspective, however, Dutch politics calls for a reduction of the scheme. For 2026 another reduction was announced regarding costs that qualify as extraterritorial costs. As of January 1, 2026, costs of living expenses, such as gas, water, and electricity, as well as private calls to the home country, can no longer be reimbursed tax-free.

This tension makes it necessary for both employers and employees who make use of the 30% facility to continuously monitor developments.

Need help navigating the 30% facility or other expat-related tax matters?
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