Dutch tax break change cheeses off expatriates
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. The Dutch government says few expats actually use the full tax break, but major firms - including brewing giant Heineken - 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 Jan 1. Many expats say within three months they could be out of pocket by as much as 800 euros ($942).
“We accept and support the right of the Dutch government to amend its tax legislation as it deems necessary,” said Jessica Piotrowski, 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 Ä35,000 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. 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”.