Dutch Government to Reduce Expat Tax Break

The coalition government in the Netherlands has proposed to reduce from eight years to five years the 30% tax break available to many expatriates working in that country.

• The reduction would take effect 1 January 2019
• It is not clear if it would affect workers already in the country, or only those who enter after 1 January 2019

Companies with temporary workers in the Netherlands could be affected by this change, although the number of such workers who remain in that country for more than five years is presumably not large.

The tax break is commonly known as the “30 percent ruling.” It is designed to compensate incoming foreign workers for the costs of relocating to the Netherlands, and takes the form of a 30% tax reduction on Dutch income that can last as long as eight years. 

In lieu of the tax break, and employer can compensate an employee on a tax-free basis for the actual expenses of a temporary residence in the Netherlands. The new policy would also apply to that compensation.

To qualify for the break, a worker must:

• Have lived at least 150 kilometers from the Dutch border for at least 16 of the 24 months prior to moving to the Netherlands for work
• Be compensated at least 37,296 Euros per year
• Have expertise that is not readily available in the Netherlands.

The new policy was announced in a 20 April 2018 letter to parliament. The State Secretary for Finance said the new policy would be included in a package of tax measures to be presented to parliament in September.

In support of the change, the government cited a review that found approximately 80% of those who qualified for the tax break were no longer using it after five years.