Expats living in the Netherlands frustrated by shrinking tax benefit

A proposal to do away with an eight-year tax break for expats could leave some residents in dire financial straits

American expats Mike and Cristina Weeks with their son in a small town near Amsterdam, Netherlands. Mr Weeks is the founder of United Expats of the Netherlands, which opposes the proposal. Photo: BlooShow more

Almost five years ago, Antonios Cheras, a Greek national, moved with his family to the Netherlands even though he spoke no Dutch and had many more job offers in the UK. The draw: an unbeatable tax break.

The so-called “30-per cent rule,” which exempts 30 per cent of an expat’s salary from income tax for eight years, has been a major factor in attracting people like Mr Cheras. Now, Prime Minister Mark Rutte’s government, looking to deliver on a coalition deal, is seeking to limit it to five years - retroactively.

For Mr Cheras, who last year bought a €400,000 ($465,000) house that will be ready to move into in December, the pull-back hits both his pocketbook and his idea of Dutch fairness and stability. He now fears he might not be able to keep the house since he was counting on the tax break over three more years to service his mortgage.

“The Netherlands had a really good reputation - that the environment is stable here to develop, as a company, or as a person, but now I feel that’s not true,” says Mr Cheras, whose new home is about 10 kilometres from The Hague in Nootdorp.

The 47-year-old software engineer was scouted to move to the Netherlands for telecom firm Royal KPN before switching to his current employer, a big Dutch financial institution.

The government’s plan has also drawn the ire of companies and academic institutions that rely on foreign talent. The chief executives of payments processor Adyen and digital map maker TomTom were among the signatories of a letter to deputy finance minister Menno Snel in June, highlighting the need for some transitional regulation.

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On April 20, Mr Snel told Dutch Parliament the time-reduction plan would affect both new and existing beneficiaries. The proposal, which is expected to be adopted by parliament at the end of this year, is part of a wider plan that includes scrapping the dividend tax, lowering corporate taxes and raising the lower VAT, and is set to save at least €284 million per year through 2021, according to government estimates.

The savings are “assuming that we expats will all stay and pay more,” says Mike Weeks, 36, from Cincinnati in the US, who is a co-founder of United Expats of the Netherlands, which opposes the proposal. “But we can’t, so we won’t. We will have to leave.”

According to 2016 data from the Dutch finance ministry, there are about 65,000 recipients of the tax benefit. An employee making €60,000 a year would face a cut of €8,844, government calculations show - or €737 net per month. At €100,000, take-home pay would be slashed by €16,665.

Mr Snel brushes away the criticism, citing a report from research and consulting firm Dialogic commissioned by his predecessor that shows about 80 per cent of the recipients do not use the benefit beyond five years.

“Why would you have a rule much longer than it’s effective,” Mr Snel said in June.

German demographer Thomas Leopold, one of the affected expats and an associate professor at the University of Amsterdam, has challenged Dialogic’s findings, saying the data used is incomplete. The Dutch finance ministry confirmed that the data in the report does not paint a complete picture and said it’s updating the estimates, which will require additional information. Overall, however, it stands by the findings, and Mr Snel is holding strong.

“I don’t consider transitional legislation legally necessary,” he said in a letter to parliament, adding that the legality in individual cases belongs to the courts.

UENL has launched a media campaign, reached out to members of parliament, staged a rally in The Hague and submitted a petition with approximately 30,000 signatures to the lower house’s finance committee at the end of May, asking for transitional regulation. Its war cry - “a deal is a deal,” or “afspraak is afspraak” - copies what Mr Rutte has said on other topics.

If the government does not budge, several expats may need to make major life changes. Some may default on loans or be forced to sell their homes at a loss, while others are contemplating cutting back on daycare, pulling kids out of international schools, or even leaving the Netherlands altogether.

UENL’s Mr Weeks and his wife Cristina say they would be forced to sell the home they bought only a year ago at the market’s peak, investing their life savings.

“Our financial future will be destroyed by this,” Mr Weeks says at their terraced home in a small town just south of Amsterdam, where they live with their toddler Parker and two Labrador retrievers, Aspen and Dutch. “We are an easy target. We don’t get to vote.”