Time limit for Netherlands expat tax break cut from 2019

The time period for expats in the Netherlands who qualify for a 30 per cent tax break is to be cut from eight years to five, starting in January next year.

The slashing of the time period will affect all expats working in the Netherlands, not just those who are planning to take up a job in the near future or who are being reassigned by their companies. Initially, the tax break was introduced to encourage Netherlands-based companies to bring in expat professionals and offset relocation costs. Prior to the decision to shorten the time period, research conducted by the Dutch Finance Ministry revealed some 80 per cent of expat workers weren’t applying the 30 per cent rule after five years’ residency.

At present, around 60,000 expats are benefiting from the generous tax break, thus costing the Dutch Treasury some €902 million in 2017 according to the finance ministry. Entitlements to the scheme include wages of around €53,000 a year, and those applying must have resided no less than 150 kilometres from the Dutch border before arriving in the country. This odd rule means Belgians and Germans need not apply, but Britons, US citizens and Italians are welcome. Concerns are being raised that the rethinking of the rules may result in the country losing out on hiring the brightest and best.

According to a spokesperson from the employers’ representative body VNO-NCW, the Netherlands still needs top-talented expats, with the move certain to reduce the supply. A recent study revealed societal benefits from the scheme far outweighed the cost to the exchequer and, with other European countries now offering similar schemes, attracting experienced foreign professionals will become far more difficult. At a personal level, the changes may well have a detrimental effect on expats who’ve committed themselves to major financial expenditures such as house purchases. The difference in annual income is expected to be huge, with expat tax advisors hoping Dutch lawmakers can agree a solution for those hit hard by the change.