Dutch decision to ditch tax break leaves some foreign residents out of pocket
Thousands living in the Netherlands will lose the perk as early as January 1 – but a lawsuit could be a way to stop any changes
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 foreign residents actually use the full tax break, but major companies – including brewing company Heineken – say the sudden cut will affect expats’ financial planning.
The row comes at an awkward time for Mr Rutte’s government, which is separately scrapping a dividend tax in a bid to attract international operators 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,” says the International Community Advisory Panel for the Netherlands – a bridging foundation between expats and 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 per cent tax rule” – which exempts 30 per cent 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.
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 living in the Netherlands stand to lose the benefit as early as January 1.
Many expats say within three months they could be out of pocket by as much as €800 (Dh3,383).
“Enforcing this policy change on current recipients will have significant and severe consequences on these people and their families,” says Jessica Piotrowski, spokeswoman for lobby group United Expats in the Netherlands.
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 foreign resident says. He asked not to be named as he works 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,” says another overseas resident, 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 in Utrecht.
The report, which included a survey among 1,463 respondents, found that about 80 per cent of the recipients of the tax cut “don’t use the benefit for more than five years”.
Of those that do, around 20 per cent “actually settle in the Netherlands,” meaning that the proviso of “temporary stay” no longer applies.
Leading companies have backed a proposal by the Dutch umbrella group VNO-NCW – representing more than 100 business federations – as well as universities to phase in the change over a three-year period.
Monique Mols, a spokeswoman for semiconductor machine supplier ASML, says 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 says. “A deal is a deal.”