Page - The 30% tax ruling
The 30% ruling and settlement agreements
Critical information for expats
Facing dismissal while benefiting from the 30% ruling creates complications that many expats in the Netherlands don’t anticipate. This valuable tax advantage has strict limitations during employment termination, and misunderstanding these rules can cost you thousands of euros. The 30% ruling significantly affects your financial situation when negotiating a settlement agreement, yet most expats receive incomplete or incorrect information about how this benefit applies during their departure.
Understanding the technical restrictions around the 30% ruling during dismissal proceedings is essential for protecting your interests and avoiding unpleasant tax surprises.
What is the 30% ruling?
Foreign employees who temporarily live and work in the Netherlands face additional costs, particularly for housing. These are known as extraterritorial costs. The 30% ruling provides financial compensation by allowing up to 30% of your fiscal annual salary to be deducted and paid out net (tax-free). Specific conditions must be met to qualify for this arrangement.
This financial benefit creates a tax advantage for employees while also benefiting employers through reduced employer contributions on social insurance premiums. The ruling represents one of the most valuable perks for qualified expats working in the Netherlands.
Current eligibility requirements for the 30% ruling
To qualify for the 30% ruling in 2025, you must meet several strict criteria:
Recruitment and residency requirements:
- You were recruited abroad or transferred to the Netherlands
- You're on a Dutch employer's payroll
- You lived more than 150 kilometers from the Dutch border for at least 16 of the 24 months before your first working day in the Netherlands
- You possess a valid tax ruling decision from the Dutch tax authorities
Salary thresholds: The standard threshold for 2025 is €46,660 gross annual salary. However, if you’re under 30 years old and hold a master’s degree (or equivalent foreign qualification), a lower threshold of €35,468 applies. Once you turn 30, the higher threshold becomes applicable from the following month.
Your taxable salary remaining after applying the 30% ruling must at least equal these threshold amounts.
Expertise requirement: You must be a specialist with expertise that is scarce or unavailable on the Dutch labor market. Exceptions to the salary threshold apply to employees conducting scientific research or doctors in training.
Important note: Starting in 2027, the ruling will decrease to a maximum of 27%, and higher salary thresholds will apply. If you started using the expat ruling in 2023, transitional arrangements may apply to your situation.
The critical restriction: No 30% ruling on severance payments
Here's where many expats make costly assumptions. The 30% ruling only applies to salary from current employment ("tegenwoordige dienstbetrekking"). It cannot be applied to severance payments or transition payments.
Why this restriction exists matters for understanding your situation. Severance payments compensate for work already performed in the past ("vroegere dienstbetrekking"), not for current labor. The Dutch tax authorities take a strict position on this distinction. Your settlement payment, regardless of how it's labeled or structured, does not qualify for the 30% ruling benefit.
This represents a significant financial difference. If you expected to receive a €50,000 severance payment with 30% tax-free, you'll actually face full taxation on the entire amount. The actual net difference can easily reach €15,000 or more.
Garden leave and salary continuation: The grey area
When employment ends, your situation regarding the 30% ruling depends heavily on your exact circumstances. Many dismissal scenarios include a period where you're released from work obligations but remain employed with continued salary payment.
This creates an important question: when does your employment actually end for 30% ruling purposes?
During garden leave or work exemption periods: The 30% ruling generally cannot be applied during periods of complete work exemption. Even though you're receiving salary and remain officially employed, the tax authorities consider this payment for past services rather than current employment.
However, limited exceptions exist under specific conditions during work exemption periods. These situations require careful analysis and proper documentation in your settlement agreement.
Regular salary during notice period: If you continue working during your notice period, the 30% ruling still applies to your regular salary. The key distinction is whether you're actually performing work or merely being paid while released from duties.
Real cases from Settlement-Agreement.nl
Thomas, a financial controller from the United States, faced dismissal with three months' notice. His employer placed him on garden leave immediately, continuing his salary but exempting him from work. Thomas assumed his 30% ruling would continue applying to these payments.
Our team at settlement-agreement.nl reviewed his situation and identified that the tax authorities would likely challenge the 30% application during garden leave. We restructured the agreement to include Thomas working remotely on transition documentation during his notice period, maintaining his active employment status. This preserved his 30% benefit on €18,000 in salary that would otherwise have been fully taxed.
Rebecca from Australia received a settlement offer including six months' severance. The employer's HR department incorrectly told her the 30% ruling would apply to this payment. She nearly signed before consulting Edwin van Jaarsveld and our legal team.
We explained the technical restrictions and negotiated an increased gross severance amount to compensate for the loss of the 30% benefit. Instead of accepting €60,000 (which she'd mistakenly thought would be partially tax-free), we secured €72,000 gross, resulting in approximately the same net amount she'd originally expected.
Strategic considerations for your settlement agreement
Understanding these technical restrictions allows for better negotiation strategy. Many expats focus exclusively on gross severance amounts without considering net outcomes. When the 30% ruling cannot apply to severance, you need higher gross compensation to achieve the same take-home amount.
If your agreement includes a notice period with continued employment, carefully document whether you'll continue working. Active employment status during this period preserves your 30% benefit on regular salary payments.
Common questions about the 30% ruling and dismissal
Can I negotiate higher severance to compensate for losing the 30% benefit? Absolutely. This represents legitimate reasoning during negotiations. Employers should recognize that without the tax advantage, you need higher gross amounts.
What if I find new employment quickly? Your 30% ruling continues for its approved duration (typically up to five years). If you find another qualifying Dutch employer, the ruling transfers to your new employment.
Does my ruling continue during unemployment? The ruling itself doesn’t expire, but it only provides benefits when you’re earning qualifying salary from a Dutch employer. Unemployment benefits don’t qualify.
Should I delay my departure date to maximize 30% ruling benefits? This depends on multiple factors including your notice period, vacation days, and potential new employment. Professional legal analysis helps identify optimal timing.
What documentation proves my 30% ruling status? Your original tax ruling decision from the Belastingdienst provides official proof. Include the reference number in your settlement agreement.
Why expert legal guidance matters
The intersection of Dutch employment law, tax regulations, and the 30% ruling creates complexity that requires specialized expertise. Edwin van Jaarsveld has spent years advising expats through these exact situations, understanding both the legal technicalities and practical negotiation strategies.
Many expats attempt to handle dismissal negotiations independently, often relying on incomplete information from HR departments or online forums. The financial consequences of misunderstanding 30% ruling restrictions can be substantial.
At our legal office ‘settlement-agreement.nl’, we’ve handled hundreds of cases involving expats with the 30% ruling. We understand the technical requirements, know when exceptions might apply, and can structure agreements to optimize your after-tax outcome within legal boundaries.
Take action before signing
If you’re facing dismissal and currently benefit from the 30% ruling, contact our lawyers at settlement-agreement.nl before signing any settlement agreement. We’ll review your specific situation, explain exactly how the ruling restrictions affect your case, and develop a negotiation strategy that maximizes your net financial outcome.
For current information about 30% ruling requirements, always consult the official Dutch tax authority website at: