30% ruling, tax free salary

The 30% ruling is meant to attract employees with specific skills or expertise that are scarce on the Dutch labor market to the Netherlands by providing these employees with fiscal incentives.
The most significant incentive or benefit is that employees are allowed to receive free from Dutch taxation the higher of either 30% of their employment income or the so-called extra territorial expenses (such as cost of living allowance, housing, home leave, etc.). In addition, employees are allowed to receive a tax free reimbursement for the expenses of an international school for their children. In a nutshell and in general, this means that 30% of your salary can be paid tax-free.
The 30% ruling is meant to attract employees with specific skills or expertise that are scarce on the Dutch labor market to the Netherlands. First of all this means that employees either need to be recruited while outside the Netherlands or assigned to the Netherlands. The Dutch employer should be able to demonstrate that there was no candidate on the Dutch labor marker for that position.

Secondly, when the employees are recruited or assigned, they must have specific skills or expertise that is scarce on the Dutch market place. The determination whether the employee has specific skills or expertise that are scarce is determined on a case by case situation by the Dutch tax authorities. For this they will look at 3 factors:

1) Relevant work experience
2) education level
3) salary level No single factor is determining, since all these 3 factors are taken into consideration in relation to each other for getting the 30% ruling (“specialist test”).Employees who are assigned to the Netherlands by their foreign employer, and who have worked more than 2,5 years in the group of companies, also qualify for the ruling (“job-rotation test”).
The 30% reduces your employment income to 70% (the other 30% ruling is considered a tax free expense reimbursement) of the original agreed salary.
Consequently, this 70% will be the basis for accruing your pension entitlements and social security benefits.
Especially, with your pension you may be underinsured.

Doorneweerd Assurantien can assist you and your employer in developing facilitating alternatives to avoid or minimize these kind of deficiencies.
Source: taxpat.com