The Dutch legislature has voted to reduce the 30% tax-benefit currently available to expats working in the Netherlands.
The 30% facility
At present, qualifying workers can receive a tax-free allowance on up 30% of their salary.
The intention behind the 30% tax break was to attract skilled migrants to the Netherlands. The incentive allowed for up to 30% of salary to be earned tax-free for 5 years, on salaries more than EUR 41,954 p.a (or EUR 31,891 p.a for under 30 year olds who held a Dutch masters’ degree or equivalent).
The employee tax benefit applies on salaries up to EUR 223,000 p.a.
What is changing?
The 5 year term will remain but from January 1st, 2024, the 30% benefit will only apply for the first 20 months. Thereafter it decrease to 20% for the following 20 months and then to 10% for the final 20 months.
Also,, from January 2025 recipients will not be allowed to choose ‘partial foreign taxpayer status’. However, a transitional rule will apply whereby any employee receiving the benefit before December 31, 2023, can continue to do so until December 31, 2026.
The Rationale for Change
The rationale behind the original 30% rule was to compensate overseas workers for the costs they incur in moving to and living the Netherlands.
However, supporters of the change say that the current 30% rule is impacting the housing market in key cities such as Amsterdam, thereby pricing locals out of the market.
The changes are forecast to save the Dutch Treasury EUR 200 million p.a.