Netherlands has one of the most generous tax schemes for expats: global study

The Netherlands isn’t only very attractive to multinationals looking to avoid tax. The Dutch Tax Authority is also one of the most generous in the world when it comes to tax benefits for expats, De Telegraaf reports based on the first Global Tax Evasion Report by the EU Tax Observatory.

In addition to looking at tax avoidance, the report shows how countries lure knowledge migrants with tax breaks. The Netherlands is particularly generous to expats. Of the countries that offer tax benefits to expats, the Netherlands has by far the largest group of people who benefit from them.

A total of 92,000 people in the Netherlands fall under the 30 percent scheme, which means they do not pay tax on up to 30 percent of their wages for the first five years they live and work in the Netherlands. The scheme aims to lure knowledge that is scarce in the Netherlands. According to the report, the 30 percent scheme costs other taxpayers 1.1 billion euros.

Knowledge migrants must earn at least 60,000 euros per year to qualify for the 30 percent scheme - a very low threshold compared to other countries, the researchers said. Belgium introduced a similar scheme last year with a threshold of 75,000 euros. In Finland and Denmark, the threshold is above 100,000 euros.

According to Gabriel Zucman, an economist and one of the founders of the EU Tax Observatory, the tax breaks for expats in the Netherlands are part of the country’s favorable tax climate for multinationals. “That is why, for example, most German multinationals have subsidiaries in the Netherlands, from which they manage activities in other EU countries. It is easier to attract international employees thanks to the attractive tax regime,” Zucman said.

The researchers also noted that the billionaires in the Netherlands pay significantly less tax in proportion to their income than ordinary citizens. Netherlands residents with a low income pay an effective tax rate of 40 percent of their income. While the 45 billionaires in the Netherlands pay less than 20 percent.

When it comes to tax avoidance, the Netherlands was the most popular destination to shift profits to in 2020 - the most recent year for which data is available. About 180 billion dollars in multinationals’ profits were parked in the Netherlands that year.

The Netherlands is popular for its low taxes on income from interest, dividends, and royalties from subsidiaries. According to Zucman, the Netherlands' tax policy costs other economies about 35 billion euros.

Globally, tax avoidance through tax havens dropped by a factor of three over the past decade, according to the report. About 15 years ago, 90 to 95 percent of assets parked in tax havens were not declared in the owner’s country. In 2022, that was about 25 percent of the around 12 trillion dollars parked in offshore locations.