What is the 30 Percent Tax Ruling in the Netherlands?

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Gino Peters

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Gino Peters

Reviewed By: Belinda E.

June 3, 2026 8:47 pm

Category Tag: News

The rise of remote work made international expansion much easier in recent years, but hiring abroad still comes with legal and administrative complexity, as every country has its own labour laws and payroll rules that must be followed. In addition, not many companies can open a new entity in every new market that they are expanding into. That is when the Employer of Record (EOR) solution comes in handy.

The EOR serves as the legal employer on paper, while the client company manages important activities related to the employees responsibilities and performance.

In this guide we will cover what an employer of record is, how it works in detail, how much it can cost and which business should consider an EOR solution.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third party service provider that legally employs a person on behalf of another company in the country where the employee officially resides. As an official employer the responsibilities of EOR include issuance of an employment contract, processing payroll and withholding taxes and necessary social security contributions, as well as preparation of offboarding documents or any documentation that need to be signed by the employer. In addition, EOR ensures the compliance with local labour laws and serves as a first point of contact for any legal disputes.

The client company that hired the employee through an EOR also has a list of responsibilities. As an Employer of Record does not have the visibility on operational activities behind the scenes a client company needs to provide direction and ensure proper team integration.

In simple terms, the EOR provider acts as a legal employer in the country of the employee’s residence, while the client company takes on day-to-day manager work.

Responsibility	Employer of Record (EOR)	Client Company
Employment contracts & any other official documentation
Payroll processing
Income tax & social security contributions
Compliance with local labour laws
Statutory benefits administration
Managing daily work and projects
Setting goals and performance expectations
Providing equipment and tools
Leading the employee’s team and workflow

Employer of Record solutions gain more and more popularity in the field of global expansion as they allow businesses to hire best candidates fast and easy while staying compliant with local employment regulations. More information about EOR service are available if you would like to understand more.

EOR Meaning

The term “EOR” is the abbreviation for Employer of Record.

Employer in this instance stands for the company that hires the employee and takes on duties related to it, such as onboarding and offboarding process, payment of wages and compliance with other legal requirements.

“Record” from the EOR perspective refers to official registration with government authorities. The name of the EOR provider is stated in all payslips and tax filings, and should also be listed by the employee in any documents where employer must be stated, such as mortgage or loan applications.

One might ask a question of why this legal structure exists. As it is not possible to provide an employment contract directly to a person that legally resides in another country, the business expanding abroad typically needs to establish a local entity. That involves legal registration, arrangement of local bank accounts and organisation of payroll structure, as well as compliance with local law.

EOR allows to simplify the global hiring and reduce administrative burden through their existing legal entity.

There are some other hiring models that can be confused with EOR.

EOR and PEO

Many sources online refer to EOR as “international PEO”, which may create confusion as these models have 1 important difference.

A Professional Employer Organisation (PEO) serves as a co-employer of a client company. In other words, a business must already have an established entity in the country. The hiring tasks are, therefore, shared between 2 companies, while legal liability stays only with the client company. In the EOR model all legal risks are being taken by the official employer. Read more about the difference between PEO and EOR here.

EOR and staffing agency

Staffing companies mainly provide assistance for short-term projects by providing temporary workers. If the client wishes to employ a person for a longer time, EOR approach must be chosen.

EOR and contractor model

Contractor agreements assume the involvement of independent workers rather than employees. This model is also often used for temporary, project-based assignments. It is important to remember that there is a big misclassification risk between a contractor and an employee in the company which can lead to potential legal issues. An EOR ensures that employment is legally compliant with local labour law.

How does an Employer of Record work?

While it may sound complicated at first, a process behind the employer of record model is relatively straightforward.

The operating company selects a candidate

The client company recruits the employee they want to hire in another country

The EOR becomes the legal employer & local employment contract is issued

The Employer of Record uses its local legal entity to prepare and issue an employment contract that complies with labour law of the country where the employee is based. Depending on case-by- case situation, the work visa might need to be secured beforehand. Our company provides immigration services, more details can be found here.

Payroll and taxes are managed

The EOR takes on recurring responsibilities related to a payroll and ensures correct processing of income tax, social security contributions etc

Benefits are administered

Paid leave, sick leave, pension contributions and any other statutory benefits are being managed by the EOR.

Ongoing compliance and HR support

It is the responsibility of the EOR to monitor changes in local labour law and ensure ongoing compliance.

Example:

Imagine a UK-based tech company found a perfect candidate in Germany for a position of a software developer.

Instead of going through the administrative burden of opening a legal entity in Germany, the company chooses to work with an Employer of Record. The EOR hires the developer under a German employment contract and manages payroll and taxes. At the same time the UK company welcomes the new employee in the team and manages the daily work of a developer.

What services does an Employer of Record provide?

The Employer of Record does more than just providing an employment contract to the employee. Typically a wide range of HR and compliance services is included in the EOR offer. For example, read about the services included in our EOR package here.

Employment and HR administration

Locally compliant employment contracts and support with other documents requested by authorities
Employee onboarding
Employee record management. For example, control over PTO

Payroll and tax management

Regular payroll processing
Tax withholding and reporting of social security contributions with authorities
Payslip generation and creation of annual wage tax certificates

Benefits administration

Management of statutory benefits
Pension contributions (where required)
Support with benefits such as maternity leave allowance, sick leave allowance etc

Compliance and risk management

Insuring compliance with local labour law
Management of onboarding and offboarding processes
Representation in difficult legal and court cases

Additional services:

Some EOR providers ( such as ThisWorks EOR Services) provide additional services such as:

Work permit and dependent visa support
Background checks
Relocation support
Value added services: support with housing, company car, banking, etc ( depending on the country).

This vast list of services allows businesses to manage international teams, while staying compliant and avoiding complex local employment administration.

Benefits of using an EOR service

There are multiple advantages the businesses can get from working with an Employer of Record provider.

Faster global hiring

Setting up a new entity can take up to several months. With an EOR the hiring process can take several days.

Reduced compliance risk

A trustworthy EOR provider ensures the compliance with all local regulations. As the labour law varies greatly between countries, having a knowledgeable party to rely on can make a big difference.

Lower expansion costs

Establishment of a new entity is not only a time-consuming process, but also costly. With EOR services these costs can be avoided.

Access to global talent

The location of a remote candidate is not a problem if the company uses Employer of Record services. In other words, the best candidate for specific business purposes can be chosen.

Scalable hiring model

EOR services are ideal for organisations that want to scale international hiring quickly. They are particularly useful in the following situations:

Remote-first teams and organisations
Companies testing new markets abroad
Startups expanding internationally

How to choose the right Employer of Record

Choosing between several EOR providers is important, as it influences not only compliance, but also employee experience for new hires and how your company is perceived on the job market.

Here are some important things to keep in mind when deciding on your EOR partner:

Geographic coverage

Make sure that EOR provider can cover the country where you want to expand globally. Read about our EOR coverage here.

Pricing transparency

Check that EOR provider does not have any hidden costs and the pricing is clearly outlined in your MSA.

Compliance expertise

A strong EOR provider should have a team of experienced local HR specialists who understands all in and outs of a national labour law.

In-house vs partner model

Some EOR providers rely on their third-party partners, while others manage employment directly through their own local entities.

Customer support

It is important to find a EOR partner that helps with any questions or concerns in a quick and professional manner. That can be crucial when dealing with employee offboarding or any legal disputes.

Warning signs

Understanding the importance of choosing a right party, your company should be cautious of providers that lack local expertise and cannot give clear answers to your labour law questions. In addition, companies with slow response times can prove to be unreliable in critical situations. Furthermore, providers with complex pricing models with many hidden fees can create a lack of cost transparency and result in unforeseen expenses.

By selecting a provider with strong expertise in local labour law and reliable support from dedicated teams, your company can ensure a smooth international growth. Learn why companies choose ThisWorks as their EOR partner.

How much does an employer of record cost

The vast coverage of services the employer of record provides makes many businesses ask how much an EOR costs.

Pricing models vary greatly on the provider and the country of coverage, but most EORs use one or more of the following structures.

Flat monthly fee per employee.

The EOR provider charges a fixed monthly fee for each employee they have on the payroll from the client.

Percentage of salary

While not being a popular approach, some EOR providers charge a percentage of the employee’s salary, typically ranging between 5%-15%.

Setup fees

Some providers charge onboarding or offboarding fee for each employee.

The fee that the business needs to pay to an EOR provider also depend on the location of a service. Local labour law complexity of some countries can influence the fee. In addition, some countries have specific statutory benefits and payroll administration requirements. Furthermore, employee headcount in the specific location can influence the fee.

EOR vs setting up a legal entity

To establish a new entity the organisations needs to go through legal and tax registration. In addition, accounting support and ongoing compliance costs such as the fees for local labour lawyers can make setting up a legal entity significantly more expensive.

An EOR allows companies to expand globally without these upfront investments.

EOR vs hiring contractors

Some businesses decide to hire international workers as contractors. However, this approach can often lead to a misclassification risk, which can cause legal and tax liabilities.

A professional EOR provider ensures that the new starters are compliantly onboarded under local employment regulations.

EOR FAQs

Is an EOR the same as a PEO?

No. PEO model assumes co-employment and requires the business to already have established local entity, while EOR employs new talents through its own entity only.

Can an EOR hire contractors?

While some EOR providers can support hiring contractors, it is important to remember that main function of EOR is the employment of full-time workers legally in a country. A risk of misclassification between EOR and contractor should be also considered carefully.

Is an employer of record legal?

Yes, when established and structured properly, Employer of Record entities are legal and widely used for international expansion by many companies.

When should you use an EOR?

The most common reason for using EOR include:

Hiring employees located in another countries remotely
Testing new markets before establishing an entity
Expanding internationally

Can you switch from EOR to your own entity?

Yes. Many companies initially hire through an EOR for the ease and speed of expansion and later transition employees to own legal entities upon their establishment. It is important to remember that some countries require specific procedure to be followed in such a scenario.

Get in touch with ThisWorks

Expanding your team globally does not need to be long and administratively complex.

With the use of Employer of Record the businesses can have access to the best talent from around the world while ensuring full compliance with local labour laws.

ThisWorks can support your global expansion with our compliant Employer of Record services.

Contact our team to find our how we can help your international team glow fast and compliantly!

A Comprehensive Guide on the 30 Percent Tax Rule in the Netherlands

International workers and expats operating in the Netherlands must comprehend the Netherlands’ 30 percent tax ruling. The financial considerations of individuals who have just relocated to the Netherlands are greatly impacted by this tax policy, which is a component of Dutch taxation laws. It’s a special feature of Dutch tax law that provides eligible foreigners with significant Dutch tax benefits.

Understanding this rule is essential for foreign employees since it has a direct impact on their net income and tax obligations. This decision is part of the Netherlands’ expatriate tax system to draw in highly qualified overseas workers. Expats can better arrange their finances and take advantage of possible tax savings by being aware of the Netherlands tax ruling. You can get detail info and proper guide about current Netherlands’ taxation laws on ThisWorks.

What is the Thirty Percent Tax Rule in the Netherlands?

One of the most important aspects of Dutch tax law is the 30% tax ruling. It is designed to attract skilled expats by enabling a precisely 30% tax-free component of their pay. This incentive is intended to lessen the additional expenses foreigners incur while relocating to the Netherlands. They thereby experience an increase in net income. Because of this, the Netherlands is a top choice for talent globally.

History and Recent Changes to the Rule

Fundamentally, one of the mainstays of Dutch tax benefits has always been the 30 percent tax ruling. Initially, a tax-free allowance of up to eight years was granted. For expatriates, this meant substantial financial benefits. It also positioned the Netherlands as a contender for international knowledge.

However, this Netherlands expat tax strategy has changed recently. The benefit period was reduced from eight to five years as of January 1, 2019. This action aimed to strike a balance between economic responsibility and the nation’s attraction to foreign labor. Additionally, starting on January 1, 2024, the benefit gradually decreases. Over the five years, it begins at 30%, declines to 20%, and then settles at 10%. This stepwise strategy ensures a smoother transition to full tax duties by easing expatriates into the full Netherlands taxation rule.

These modifications also included a wage cap for the 30% ruling. By doing this, the benefit is guaranteed to reach the intended audience—highly skilled migrants who are in high demand in the Dutch market. This modification emphasizes the government’s goal of maintaining the Netherlands’ 30% tax ruling concentrated on luring in critical talent.

Even with arguments about its justice and economic effects, the decision is still essential for drawing in top talent from around the world. For present recipients, the Dutch government has established transitional measures. This demonstrates a dedication to equity in these modifications.

What is the Eligibility Criteria?

It’s important to know if you qualify for the Dutch 30% tax rule. This part of the Dutch tax code is intended to draw in highly qualified foreign workers by providing them with substantial Dutch tax advantages. The standards guarantee that the Netherlands tax rule targets the appropriate people, which enhances the nation’s attractiveness as a worldwide talent hotspot.

There are a few important conditions that must be fulfilled to qualify for the Netherlands’ 30% tax rule. First and foremost, the person needs to work for a Dutch company. This sets the Netherlands tax ruling apart from other tax benefits. It is a fundamental requirement. By attracting workers with specialized skills that are hard to find in the Dutch labor market, the regulation hopes to strengthen the country’s innovative and economic capacities.

Specific Conditions and Exceptions

The Netherlands expatriate tax rule has particular requirements to be eligible. The hiring of a person from outside the Netherlands is a crucial need. More specifically, they had to have spent more than 16 months of the 24 months before beginning their employment in the Netherlands residing more than 150 kilometers away from the Dutch border. This requirement makes sure that the Dutch tax advantages are only available to foreign talent moving to the Netherlands for employment.
The candidate must also have specialist knowledge or abilities that are uncommon in the Dutch labor market. Annual wage thresholds are established by the Dutch 30% tax rule to identify such skills. Every year, these limits are adjusted to reflect shifting market demands and maintain benefit alignment with the state of the economy. In recognition of the potential impact of developing talent on the Dutch economy, there is a lower pay barrier for professionals under 30 who hold a master’s degree.
The rule’s exceptions are also important. For instance, regardless of pay, medical residents and scientific researchers might receive the tax benefit. This exception emphasizes how much value is put on contributions to the academic and research sectors in the Netherlands, which are essential to the long-term prosperity of the nation.

What are the Benefits and Financial Implications?

The 30% tax rule in the Netherlands is a crucial component of Dutch taxation laws, with substantial financial advantages and implications. This Dutch tax ruling is designed to offer significant financial benefits to businesses and competent foreign workers alike, in addition to luring them in. Anyone thinking about taking advantage of this Dutch tax benefit must have a thorough understanding of the tax-free allowance and income implications.

What are the Effects on Salary?

The granting of a tax-free allowance lies at the core of the Netherlands’ 30 percent tax ruling. To be precise, the tax exemption amount for an expat is 30% of their gross earnings. When compared to regular taxable pay, employees’ net income increases due to this tax-free allowance. For example, if a person’s gross pay is €100,000, €30,000 of it would be tax-free under the 30% ruling. This lowers the taxable income to €70,000, which saves a lot of money in taxes and makes working in the Netherlands more financially appealing for experts from other countries.

Advantages for Employers and Employees

Employers and employees alike might profit from the Netherlands’ 30% tax rule. Workers benefit from lower tax obligations, which raises their take-home pay. This is a very helpful perk for foreigners who have extra moving expenses. A more seamless and financially sustainable shift can be facilitated by the increased disposable income, which can somewhat offset these costs.

Employers gain from being able to entice top personnel from around the world by providing more attractive remuneration packages. Employers can now offer greater net incomes without having to pay additional expenses thanks to the tax ruling.

Step-by-Step Guide on Applications Procedure

Our experts have crafted this step-by-step guide specifically for you, to navigate the 30% tax ruling in the Netherlands with ease. Here is all you need to know:

An employer-employee agreement is the first step toward applying for the Netherlands’ 30 percent tax ruling. The verdict must be acknowledged in writing by both parties. Usually, the job contract includes this.

Obtaining Documents: Start by assembling the required paperwork. These consist of your work contract in the Netherlands, your passport or photo ID, and maybe your BSN number. In addition, you’ll need your Dutch address, documentation proving you lived outside the country before the work, and the tax information of your employer.
Completing the Application: The Dutch Tax Office application form needs to be filled out by both you and your employer. Here, completeness and accuracy are essential.
Application Submission: After completing the form and assembling all necessary paperwork, send it all to the Dutch Tax Office. Verify everything to make sure there are no delays.
Awaiting Approval: It may require up to ten weeks for the review procedure. The Tax Office reviews your application against the Netherlands tax ruling criteria throughout this period.
Getting Confirmation: Following approval, a letter of confirmation will be sent to your company and you. This letter describes the term and applicability of the tax advantage.

List of Essential Documents and the Employer-Employee Contract

The application requires certain documentation to be eligible for the 30 percent tax ruling in the Netherlands. Important records consist of:

Passport or valid photo ID.
A Dutch employment contract.
Your BSN number, if you have one. “The citizen service number (BSN) is a unique personal number allocated to everyone registered in the Personal Records Database (BRP). Everyone who registers with the BRP is automatically given a BSN.” Government of the Netherlands.
Proof of residence outside the Netherlands before your job started.
Your company’s details, including its tax number.

The employment contract is essential. It must be made very clear that both parties accept the consequences of the decision and agree to apply for it. Because unemployment and disability payments are dependent on taxable income, this agreement may affect your taxable wage. You can read more about the application process on the official Belastingdienst from the Netherlands (Tax Administration Netherlands).

Challenges and Considerations in the Whole Process

Comprehending the advantages and possible drawbacks of the Dutch 30 percent tax verdict is essential while navigating the country’s tax regulations. Significant Dutch tax benefits are provided by this tax ruling, but there are also additional difficulties and things to take into account, particularly for expatriates who are making long-term financial plans.

Keeping up with the regular changes to Dutch tax regulations is one of the biggest issues associated with the 30% tax ruling in the Netherlands. Benefits and eligibility may be impacted by these changes. Employers and employees must be aware of the most recent changes to the Netherlands taxation rule to address this. Engaging with tax experts who focus on Netherlands expatriate tax matters can offer significant perspectives and assistance in managing these modifications.

How to Avoid Complications of the Process?

Ensuring compliance with all standards and the intricacy of the application procedure presents additional challenges. Errors or misunderstandings in the application may cause delays or the tax advantage to be denied. Thorough planning and double-checking of all paperwork and application forms are crucial to reducing this. To make sure that every element of the application complies with the guidelines outlined in the Netherlands taxation rule, employers and employees should collaborate closely. If you want to benefit from the 30% tax ruling in the Netherlands, contact our experts today.

Frequently Asked Questions

Will the 30% ruling affect my eligibility for Dutch social benefits?

Indeed, the 30 percent tax ruling in the Netherlands may affect your eligibility for some social benefits in the country. The decision lowers your taxable income, which may have the effect of lowering your contributions to pension and social security programs, which are reliant on your taxable income. It is crucial to take into account this component of the Netherlands tax law, particularly when making long-term financial plans.

What impact does the 30% ruling have on my net pay?

The 30 percent tax verdict in the Netherlands increases your take-home pay. This tax ruling from the Netherlands exempts 30% of your gross wage from taxes. In other words, you only pay taxes on 70% of your income. As a result, your monthly income increases. A significant portion of the Dutch tax incentives for foreigners is this.

Can the ruling be applied retrospectively?

The 30 percent tax verdict in the Netherlands is applicable retroactively. The ruling becomes operative on the date of your employment start if you apply within four months of beginning your employment. If you wait to apply, it will begin the month after your application. The Dutch tax laws about expatriates include this vital detail.

What happens to the ruling if I change jobs?

You are still able to maintain the 30% tax ruling in the Netherlands even if you shift jobs. However, you have to start the new employment three months after leaving the previous one. Additionally, your new position needs to comply with Netherlands tax regulations. In this manner, when you change employers, you won’t forfeit the Dutch tax benefits.