Netherlands to Cut Time Limit for 30% Tax Break for Expats
Dutch employers are concerned over expat tax changes
The Netherland’s government is reducing the time limit for 30% tax break for expats from 8 to 5 years.
The Netherlands are cutting down the time period during which professional expats working in the country can benefit from a reduced tax rate. Plans to cut the time period when expats qualify for the 30% tax ruling from eight years to five will come into force on January 1 next year.
This reduction will apply to all the expats already working in the Netherlands as well as those who are planning to take up an employment in the country in the near future or who are being reassigned by their companies.
The 30% ruling was introduced to help Netherlands-based companies become more competitive in a global employment market. The tax break allowed them to bring in expat professionals and offset relocation costs.
At present, around 60,000 expats are benefiting from the generous tax break, thus costing the Dutch Treasury some €902 million in 2017 according to the finance ministry.
What does the 30% ruling actually mean in financial terms? From a tax perspective, the salary agreed upon between the employee and employer is reduced by 30% and only this reduced amount is subject to income tax. In return, the employee receives a tax-free 30% allowance as reimbursement for expenses.
To claim the ruling, expats have to earn around €53,000 a year (or €37,000 after the 30% has been deducted) and must have lived at least 150 kilometres from a border with the Netherlands before moving here, effectively ruling out Germans and Belgians.
Indian nationals are the most likely to use the ruling, followed by British, American and Italian expats.
Some companies are concerned that the slash of the time period of the tax break may result in the country losing out on hiring the brightest and best.