US Citizens Get an Additional Benefit Under the 30% Ruling

The 30% ruling is intended to attract skilled individuals to the Netherlands, and indeed is the reason many US citizens choose to move to the Netherlands, since it (effectively) means the top tax rate is 36.4% (vs. 52% without the 30% ruling). 

Many US expats (and their tax advisors) are not aware that US citizens have an additional benefit that is not available to other countries' citizens - the "foreign days exclusion".  US citizens (or green card holders) with the 30% ruling are only required to pay tax on days worked in the Netherlands.  What this means is that you do not pay Dutch tax on days worked outside of the Netherlands.  This can be a huge benefit for individuals who travel a lot for work. 

For example, if your salary is EUR 157,143 per year you would initially get 30% of this amount tax free, leaving a taxable salary (for Dutch tax purposes) of EUR 110,000.  Assuming you worked 220 total days in the year, this translates to EUR 500 per day of work.  Since the "marginal" tax rate is 52% on this level of income, the benefit of each day worked outside of the Netherlands is 52% * EUR 500, or EUR 260/day.  So that week you spent working in London would add EUR 1,300 to your pocket at tax time.  Not bad!

Note that US citizens (and greencard holders) are still subject to US tax on their "worldwide" income, so you may shift some of the tax burden to the US (this is the reason that the Netherlands allows a reduction for workdays outside of the Netherlands, it has to do with a special clause in the US-NL treaty).  But shifting income out of a 52% tax bracket will always work out to your benefit.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998. His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues. He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.