Dutch government plans new cut to expat tax break to collect €20 million more per year
The current caretaker Cabinet will include a proposal to introduce another cut to a popular income tax break for certain expats in an effort to shore up the national budget. The goal is to collect another 20 million euros in tax revenue, sources close to the Cabinet told the Telegraaf.
Currently, certain immigrants recruited abroad to fill jobs in the Netherlands are able to access the tax break commonly known as the 30 percent ruling. Those who qualify do not have to pay income tax on 30 percent of their gross wage, an incentive to help cover relocation and increases in cost of living. The tax break can be claimed for a period of five years.
This was reduced to 27 percent with the national budget that the current administration, led by Prime Minister Dick Schoof, managed to get approved by Parliament for the 2025 calendar year. The cuts will take effect from 2027 for anyone granted the tax break beginning in 2024. Those given approval before the start of that year will maintain the 30 percent ruling.
An estimated 92,000 people claimed the expat tax break up to 2024, allowing the workers to save an average of 12,000 euros per year. This adds up to over 1 billion euros per year, according to an analysis by Follow the Money based on figures from the Ministry of Finance and the EU Tax Observatory.
The Cabinet will introduce the plan on Prinsjesdag, the traditional date when the government releases its annual budget plans for the following year. The budget could face numerous challenges before earning majority support in Parliament. Prinsjesdag is held on the third Tuesday every September.
The expat tax break was a sudden target in the run-up to the 2023 election for the Tweede Kamer, the lower house of Parliament. A plan to slash the tax break was pushed by Pieter Omtzigt, the politician who left the CDA to form his NSC party earlier that year. He demanded cutting the tax break all the way down to 10 percent in stages. It was one of several legislative proposals presented by various politicians during a campaign season that was particularly hostile towards all immigrants, including expats and international students.
One Dutch multinational company after another reacted negatively to the policy moves and rhetoric, stating plans to either relocate out of the Netherlands, or spend more money on expanding foreign branches instead of local offices. Following the election, the last Cabinet of Schoof's predecessor, Mark Rutte, was forced to push an expensive plan to placate the international business community. This included a massive investment in high-tech education and infrastructure to make it possible for companies like ASML to continue to grow in the Netherlands.
After the election, months of bickering led to the formation of a four-party coalition. This included participation from the far-right PVV, pro-business right-wing party VVD, staunch right-wing farmers' party BBB, and the NSC.
The coalition fell apart before the summer, having survived just 336 days in office. First, PVV leader Geert Wilders pulled out when he made aggressive demands on asylum and immigration policy, and insisting they take immediate effect. This despite the fact is own party was in charge of asylum and immigration issues in Schoof's Cabinet. More recently, the NSC abandoned the Cabinet after continued in-fighting. Omtzigt has also left his own party and retired from national politics after recovering from burnout.
As a result, the Cabinet is not guaranteed an ability to pass any policies in either the Tweede Kamer or the Eerste Kamer, the upper house of Parliament. The VVD and BBB represent 32 of 150 seats in the Tweede Kamer, and the two parties have 24 of 75 senators sitting in the Eerste Kamer.
