30% Ruling & Tax-Equalization

/30% Ruling & Tax-Equalization

30% Ruling & Tax-Equalization

Expats with a tax-equalization agreement are guaranteed a net income. How does this work with the 30% ruling?

In 2008 The Court of Appeals Den Bosch decided about this. A US national with a tax-equalization agreement worked in the period with the 30% ruling for a total of 97 days, of which 55 in The Netherlands. The discussion between the US national and the tax authorities was regarding what amount of gross income would be taxable in The Netherlands.

The tax inspector wanted to recalculate his net income to gross income, apply the 30% ruling and then apply the 55/97 ratio. The US national did the opposite and applied the ratio of 55/97 first and then recalculated that outcome to gross income and applied the 30% ruling afterwards. The difference in taxable income between the two approaches was approx € 6,000.

The Court decided in favour of the US national. They decided that the Dutch Income he earned was 55/97 part and therefore the ratio should be taken into account first, before recalculating that net outcome to gross and applying the 30% ruling.

Technical reference (for tax professionals): Court of Appeals Den Bosch, October 31, 2008