Many expats in the Netherlands have the 30 % ruling. How does a dismissal affect the ruling?
What is the 30 % tax ruling?
The 30% ruling is a tax exemption for employees who meet certain requirements. These requirements include having a specific skill that is not or is not sufficiently available in the Netherlands, and having lived outside of the Netherlands for at least 12 months before the start of the employment contract.
The 30% ruling applies to 30% of the employee's salary, up to a maximum of €30,000 per year. The employee does not have to pay taxes on this portion of their salary.
The 30% ruling is a very valuable benefit for employees who meet the requirements. It can help to offset the high cost of living in the Netherlands.
Retaining the 30 % ruling in the event of dismissal
For expats in the Netherlands being dismissed, it is essential to retain the 30 % ruling in because of the substantial benefits.
In principle, an employee can keep the 30% ruling after being dismissed if he meets the following conditions:
- The employee must find a new job in the Netherlands within 3 months of their dismissal.
- The new job must meet the requirements for the 30% ruling.
- The employee must inform the employer of their new job about the 30% ruling.
If an employee meets these conditions, they can in principle continue to apply the 30% ruling to their salary at their new employer.
Suspension and illness
Suspension often precedes the dismissal. This is a problem as to the 30 % ruling. The 30% ruling does not apply when the employee is put on non-active status. The 30% ruling only applies to the employee actually performing duties. If an employee is suspended, the 30% ruling cannot be applied.
And even more important: the 3 month window (to find another job to keep the 30 % ruling) will start right after the suspension starts. This is important, because the dismissal (proceedings) might take months and for this reason, the employee might lose the ruling. Therefore, it is important (as an employee) to deal with an unjustified suspension right away if necessary (the bar is set quite high for any suspension).
Illness is also often a factor in dismissal situations. The 30% ruling continues to apply to salary that an employee receives during illness. However, the employee might receive less salary during illness because the law only requires an employer to pay 70 % of the salary during illness.
Garden leave (or being released from performing duties) is equal to a suspension: no duties are performed so the ruling is no longer applied (and the 3 month window will start). Since garden leave is part of most settlement agreements, this is an issue that needs attention in negotiations.
Important: this text does not qualify as tax advice. No right can be derived from this text.