Contractual agreement

Based on the 30% ruling, the employer will split  the employee's agreed compensation package into a tax free allowance equal to (a maximum of) 30% of the agreed package and 70% wages (see the benefit calculated).

To allow this split, it needs to be formalized as part of the employment contract between the employer and the employee. This needs to be worded in such a manner that the initial agreed compensation will be reduced resulting in an initial agreed compensation package equal to 100/70 of the new agreed compensation. In addition, the contract must also include that the employee receives an allowance for extraterritorial costs equal to (a maximum of) 30/70 of the new agreed compensation. If not included in the original employment contract, then this agreement can be made in the form of an addendum to the existing employment contract.