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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

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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.”

 ?? AFP ?? Prime Minister Mark Rutte’s government is hoping to take advantage of the UK’s EU departure
AFP Prime Minister Mark Rutte’s government is hoping to take advantage of the UK’s EU departure

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