Dutch tax break change cheeses off expats
Plans by the Netherlands to scrap a major tax break for foreigners have left expatriates in a spin at a time when the country is hoping to lure multinationals as part of a Brexit exodus.
Thousands of foreign workers face a big hit to their salary under the proposals, confirmed in September as part of Prime Minister Mark Rutte’s 2019 budget, AFP reported.
The Dutch government says few expats actually use the full tax break, but major firms say the sudden cut will affect expats’ financial planning.
The row comes at an awkward time for Rutte’s government, which is separately scrapping a dividend tax in a bid to attract international firms and cash in on Britain’s departure from the EU.
The move has caused “a great deal of concern among the international community in The Netherlands”, said the International Community Advisory Panel for the Netherlands (ICAP) — a bridging foundation between expats, local and national government.
The tax break was introduced in the 1960s to bring in foreign talent to the land of cheese and clogs, and to boost the Netherlands’ investment climate.
It originally allowed a carefully-selected group of highly-skilled foreign workers to use the so-called ‘30-percent tax rule’ — which exempts 30 percent of their salaries from income tax — for a decade.
The tax rule has been a drawcard ever since and is there to help newcomers cover extra costs such as school fees and pensions.
It is applied however with the proviso that expats ‘temporarily’ remain in the Netherlands.
‘Severe consequences’
In 2012, the government cut the rule’s running time from 10 years to eight — and two weeks ago, it said it was slashing a further three years, meaning newcomers can use the rule for five years.
But the government is also applying the change retroactively — meaning that thousands of expats already living in the Netherlands now stand to lose the tax benefit as early as January 1.
Many expats say within three months they could be out of pocket by as much as €800 ($942).
“We accept and support the right of the Dutch government to amend its tax legislation as it deems necessary,” said Jessica Piotrowski, the spokeswoman for lobby group United Expats in the Netherlands.
“However, enforcing this policy change on current recipients will have significant and severe consequences on these people and their families,” she told AFP.
Founded last year, United Expats has garnered a petition with 40,000 signatures and raised more than €35,000 for a possible lawsuit.
“I think this is a huge mistake,” one expat said, who asked not to be named as he is working for a major international tech company.
“You can’t just change things when people believe they have an agreement with government. That’s how you drop people into trouble,” said another expat, speaking on the same condition.
‘Deal is a deal’
The Dutch government based its decision on the findings from a 150-page study published last year by a research group based in the city of Utrecht.
The report, which included a survey among 1,463 respondents, found that around 80 percent of the recipients of the tax cut “don’t use the benefit for more than five years”.
Of those that do, around 20 percent “actually settle in the Netherlands,” meaning that the proviso of ‘temporary stay’ no longer applies.
The Finance Ministry spokeswoman, Heleen Haverkort, said the 150-page report underlines the government’s “point of view that the change to the rule should be implemented with immediate effect”.
But many expatriates, a separate independent survey with more than 4,500 respondents, and major Dutch international companies, like top microchip machine maker ASML, all disagree.
The top companies backed a proposal by the Dutch umbrella group VNONCW — representing more than 100 business federations — as well as universities to implement the change over a three-year period.
Monique Mols, a spokeswoman for ASML, said that without the transitional period “the ruling violates an agreement”.
“This is a problem. Internationals did their financial planning based on a government they thought was reliable. Now they find it’s not the case,” she told AFP.
“A deal is a deal,” added Mols.