Expats in the Netherlands got a shock late last year when the Dutch officials announced they were considering changing retroactively the 30-Percent Ruling, one of the highly skilled internationals’ best financial incentives to come work in the Netherlands.
Then the news got worse: On April 20 the Council of Ministers announced the length of time expats can take advantage of this substantial tax break will be cut to five years from eight years effective January 1, 2019. And that applies to everyone – new arrivals and those already taking advantage of it.
The 30-Percent Ruling allows about 60,000 expats, as well as Dutch nationals who have been away for more than 10 years, to reduce their tax bills through the exemption.
Now, a new non-profit expat group, United Expats of the Netherlands, has created a campaign to remind Dutch officials “a deal is a deal” and rally those affected.
And you can help:
• United Expats is very close to collecting 30,000 names on its petition to the Dutch parliament. As of Monday, the number stood at about 24,500, and there’s still two weeks to go before the target submission date of 1 June. You can sign it here on Change.org.
• United Expats also is raising funds to pay for messaging, legal experts and events/rallies. You can donate here on GoFundMe.
• There is a demonstration planned for Den Haag, the Dutch capital, later this month, but the date hasn’t been announced because permitting isn’t complete.
For those of us who are Do-It-Yourself Expats and don’t fall under the exemption, the 30-percent reimbursement ruling allows employers to give highly skilled internationals a tax-free allowance equivalent to 30 percent of their gross salary, salary that would otherwise be subject to Dutch payroll taxes.
The tax break had been cut in 2012 from the original 10 years to eight years, but the cut only applied to new arrivals, not to expats already in the Netherlands.
This time, expats who’d thought they would have the full eight years of tax exemption, and who based their finances having more tax-free income, suddenly have to make major budget adjustments.
“It’s really risky to be doing this because you’re breaking trust with the government,” said Jessica Piotrowski, communications chair for Expats United, and a university professor in Amsterdam.
“If you are someone who is looking for a position and you are a highly skilled expat, are you going to go to a country where the (remuneration) package is subject to change? It’s really dangerous doing this because you’re breaking trust … in a country where your word is your bond. That is fundamentally counter to the ethos of the Netherlands, and it’s highly problematic for continuing to attract highly skilled expats. It has a lot of negative potential repercussions.”
For example, many expats made financial decisions based on the 8-year exemption, putting that 30 percent of salary into buying a home.
Mortgage companies advise expats to take a mortgage that has higher payments early on, decreasing as time goes on. “The idea is, post-eight years, when your salary decreases, your payment will decrease because you’re paying more into your home early on,” Piotrowski said. “Finances are part of life and there needs to be some guarantee in this. What they’re saying is, ‘Well, they’re not.’ ”
Cutting the terms of the 30-Percent Ruling will affect a lot of people like her, she added:
I’m an academic. I don’t make that much money to begin with. I do visit my family twice a year and I do save enough money to put into an American pension plan because I can’t retire here. I’m not living some lavish lifestyle and I will have to also leave … and that’s devastating.
Piotrowski said Expats United members agree the Dutch government has every right to set its policy. “But this is a broken deal, and that’s not okay.”
The irony is that Dutch officials call the new 30-Percent Ruling cut a budgeting necessity, yet changing the terms of the 30-Percent Ruling will yield little savings.
From the Expats United website:
This policy change is estimated to increase income tax revenue by only €284 million each year, as of 2019. With current expenditures at approximately €277 billion, this new tax policy will reduce costs by about 0.1 percent, according to United Expats.
The 30-Percent ruling was created in 2006 as an incentive to attract highly skilled internationals, addressing the “extraterritorial costs” of moving and other expenses.
Expats aren’t the only people pushing back. Universities and some big corporations are telling policymakers this is a particularly bad idea.
The Dutch News reports that the VSNU, a Dutch university association, opposes the move, arguing expat academics will lose thousands of dollars each year in income. Employers associations have also weighed in, saying cutting the 30-Percent Ruling will make the country less competitive in the effort to attract foreign talent.
The effort to cut the terms of the 30-Percent Ruling date back to last June, when a report commissioned by the Dutch finance ministry found the exemption “too generous.” Some unions also oppose the exemption saying the money would be better spent on domestic programs.