Expat tax changes will make Netherlands "less competitive" Expat tax changes will make Netherlands "less competitive"

Expat tax changes will make Netherlands "less competitive"
08 May 2018

From 1 January 2019, expats in the Netherlands will qualify for a 30% income tax break for just five years rather than the current eight.

According to Dutch News, the new time limit will apply to new and existing beneficiaries of the tax break, which means that employers only deduct tax on up to 30% of the income of staff recruited from abroad. The aim of the scheme is to encourage companies to bring in skilled overseas workers and offset the cost of relocation.

The change was included in the coalition agreement negotiated by the country’s new government last November, but the timetable to implement it had not been specified until now. Some 60,000 people currently benefit from the tax break, which cost the treasury €755 million (US$912) in 2015 and €902 (US$1,090) million in 2017, according to the finance ministry.

To claim under the ruling, expats have to earn around €53,000 (US$64,043) per year - or €37,000 (US$44,709) after the 30% tax break has been taken into consideration. They must also have lived at least 150 kilometres from a border with the Netherlands before moving to the country, effectively ruling out Germans and Belgians from being eligible.

The report said Indian nationals were the most likely to benefit from the ruling, followed by British, Americans and Italians. But the employers’ representative body VNO-NCW warned that the new time limit would make the Netherlands less competitive in the race to hire top talent.

"We’re going to need that talent as our labour market becomes more restricted," said a spokesman. "An earlier assessment found that the benefits to society outweighed the cost to the public finances.”

This meant the tax break was important to help develop the Dutch knowledge economy. “Now that other countries are introducing similar rules, it is going to be increasingly important in order to attract talent," the spokesman added.

Tax advisor Lennart Suurmond, who specialises in helping expats apply for the benefit, told Dutch News that people who have made major financial plans on the basis of the ruling – such as buying a house or other commitment – would be faced with a difficult situation as a result of the reduction in eligible time periods.

"The difference in income can be huge," he said. "I hope the government will come up with a solution for people who will be hit hard by the change."

 Emma

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

From 1 January 2019, expats in the Netherlands will qualify for a 30% income tax break for just five years rather than the current eight.

According to Dutch News, the new time limit will apply to new and existing beneficiaries of the tax break, which means that employers only deduct tax on up to 30% of the income of staff recruited from abroad. The aim of the scheme is to encourage companies to bring in skilled overseas workers and offset the cost of relocation.

The change was included in the coalition agreement negotiated by the country’s new government last November, but the timetable to implement it had not been specified until now. Some 60,000 people currently benefit from the tax break, which cost the treasury €755 million (US$912) in 2015 and €902 (US$1,090) million in 2017, according to the finance ministry.

To claim under the ruling, expats have to earn around €53,000 (US$64,043) per year - or €37,000 (US$44,709) after the 30% tax break has been taken into consideration. They must also have lived at least 150 kilometres from a border with the Netherlands before moving to the country, effectively ruling out Germans and Belgians from being eligible.

The report said Indian nationals were the most likely to benefit from the ruling, followed by British, Americans and Italians. But the employers’ representative body VNO-NCW warned that the new time limit would make the Netherlands less competitive in the race to hire top talent.

"We’re going to need that talent as our labour market becomes more restricted," said a spokesman. "An earlier assessment found that the benefits to society outweighed the cost to the public finances.”

This meant the tax break was important to help develop the Dutch knowledge economy. “Now that other countries are introducing similar rules, it is going to be increasingly important in order to attract talent," the spokesman added.

Tax advisor Lennart Suurmond, who specialises in helping expats apply for the benefit, told Dutch News that people who have made major financial plans on the basis of the ruling – such as buying a house or other commitment – would be faced with a difficult situation as a result of the reduction in eligible time periods.

"The difference in income can be huge," he said. "I hope the government will come up with a solution for people who will be hit hard by the change."

 Emma

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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