Employers are allowed to pay 30% of the wages of a foreign employee as a tax-exempt expense allowance if certain conditions are met. This is to compensate for extraterritorial costs. This arrangement is known as the 30% rule.


In order to be able to apply to the 30% ruling, a valid decision of the tax authorities should be acquired. The following conditions have been set:

1. Incoming employee

First of all the employee must be incoming. This is the case if the employee lived more than 150 kilometers outside the Netherlands in the 24 months before coming to work in The Netherlands. It may involve an employee who has been recruited outside The Netherlands as well as an employee who has been posted in The Netherlands from abroad.

2. Labour agreement

The employee must have an employment contract.

3. Specific expertise

The employee should possess specific expertise, which is not or scarcely found on the Dutch labour market. This is the case when the salary criterion is complied with. In 2016, this condition is met if the gross annual salary amounts to € 36,889.00 including holiday pay. For employees younger than 30 years old with a master’s degree, € 28,041.00. If the employee carries out scientific research in an educational institute, no salary criterion applies.


The employer and employee can implement the 30% ruling in two different ways. Firstly, the salary of the employee may be reduced by 30%, which part is paid as a tax-exempt expense allowance. The other option is that the tax-free portion of 30% is paid on top of the agreed salary.

Clearly, the second option will cost the employer more. To avoid misunderstandings, it is advised to make clear arrangements and write these down in the employment contract.

In conclusion

If it is decided not to apply the 30% ruling or the tax authorities do not grant the required permission or not all requirements are met, the employer may instead pay the actual extraterritorial costs separately tax-free. In that case it is required that these expenses are proven.

It is also important to note that the costs of school fees for children of incoming employees who go to an international school can be claimed as tax-exempt extraterritorial costs in addition to the 30% ruling.

Further information

Do you have questions about the 30% rule or would you like assistance with the application for this arrangement? Please contact the section Employment & Pension.