The 30% ruling

The 30% regulation is a tax incentive meant to attract foreign employees with specific expertise to the Netherlands. If all conditions for the 30% ruling are met and the 30% ruling is granted, the employer is allowed to grant the employee a tax free allowance up to a maximum of 30% of his gross taxable salary. This tax free allowance is considered to be a compensation for the extra costs ("extra territorial costs") the foreign employee incurs for working outside his home country. Instead of itemizing all the specific extraterritorial costs, the employer is, once the 30% ruling is granted, allowed to consider 30% of the agreed compensation package as reimbursement to cover these costs.