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Could the Dutch tax break for expats be changing?

The Dutch research bureau Dialogic has published a 155-page report, on behalf of the Netherlands’ Ministry of Finance, and one of its key findings could see the 30% tax ruling for expats being abolished.

What is the 30% tax ruling?

The reimbursement ruling is a tax break for highly skilled workers who move to the Netherlands for employment when their particular skill-set is unavailable from the Dutch workforce.

Ordinarily, workers in the Netherlands are taxed on all income from salary, property, business and professional activities, excluding permissible deductions. Skilled employees recruited from abroad are entitled to 30% of their salary tax-free as long as they meet certain requirements and can agree the terms of the tax break with their employer.

The allowance can only be claimed by expats who have moved from a country more than 150km (or roughly 93 miles) from a Dutch border, where they must have lived for 16 or more months out of the two years immediately prior to their relocation. Applicants must also earn more than €37,000 a year.

What is the problem with it?

As it stands, the ruling is far too generous, the report says. There are 60,000 people who currently claim the tax break, and in 2015 it cost the treasury €755 million, with the expected 2017 cost running to around €902 million.

Although the Netherlands is a relatively expensive place to live (the country ranks 24th on Numbeo’s cost of living index, five places above the United Kingdom), the research concludes that relocation costs and the cost of living is not high enough to warrant the 30% tax-free allowance. Instead, it says that 20% would be a much fairer figure.

As the 30% ruling plays a significant part in attracting much-needed work-talent in certain Dutch job sectors, the report does not recommend abolishing the tax break entirely. Instead, it is suggested that a number of alterations to the rules need to be put in place so that the system is not overstretched or misused.

For example, the report claims that the ruling is unfair and offers a much greater advantage to the very wealthy. As a result, the bureau suggests that a cap should be placed on the amount of tax-free income allowance.

Currently the allowance can be claimed for a maximum of eight years. Dialogic has suggested this should be reduced to just five or six years. Employee bonuses can also fall under the ruling, but this, too, could be reviewed.

Advice on income tax in the Netherlands

At this stage, it’s important to remember that these are just recommendations and nothing has been confirmed. Netherland’s State Secretary of Finance, Eric Wiebes, has said it would be up to the next Dutch government to decide the fate of the 30% tax ruling for expats.

Financial legislation and tax systems change and evolve constantly wherever you live which is why the only way you can be sure you’re making the most out of your money is by receiving financial advice from a professional adviser who is familiar with the systems in place where you are.

Blacktower’s financial advisers are fully versed in the financial systems and tax laws of their particular countries, and what’s more, they speak your language so they can provide financial advice for expats on tax matters, regular savings, wealth management, and pension planning.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Other News

Malta and Portugal have the best citizenship programmes

LighthouseWhen relocating to a new country, it’s good to know all your options so you can ensure you have the smoothest transition possible. For one thing, there’s the financial side to worry about.

This includes deciding on the best expat life insurance policy to buy as well as receiving expert pension transfer advice so that your retirement savings aren’t negatively affected by the move. 

Naturally, some nations offer a smoother residency transition, with Portuguese citizenship and Maltese citizenship among the best, according to research.

Understanding citizenship entry requirements

You will, of course, also need to be aware of the entry requirements for each country.

Several countries have systems in place with the goal of attracting expats who will be able to gain residency in return for an investment. In a post-Brexit world, these may be the best options for some overseas movers. Although not suitable for everyone, some of these systems are of a very high, reputable standard and hold a range of benefits for expats who are eligible. A recent survey has analysed which countries offer the best of these migration schemes, with people choosing to buy Malta citizenship and Portugal citizenship as a matter of priority.

What makes the best citizenship programmes?

Read More

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