There’s a big change coming to an incentivized tax break for expats working in the Netherlands that will affect how long they can receive the advantage. What is changing, you ask? Currently, expats working in the Netherlands are only taxed on 70% of their wages, meaning that 30% is non-taxable to make up for the costs of relocation, travel, housing, visas, etc. Until now (well, January 1st), this tax advantage has lasted 8 years for these expats, and the change is to shorten the period to five years. Effective January 1, 2019, any expat who will be moving to (and working in) the Netherlands, or anyone that is currently receiving the tax advantage, will be affected by the change.
The original intent of the tax advantage was to provide an incentive for specialized and skilled talent to move to and work in the country for an extended period of time. However, after the government evaluated how workers are using the funds (and for how long), it was determined that the majority of people are not taking advantage of the tax break for longer than five years.
Companies should keep this rule in mind when considering relocation and assignment packages for their employees moving to the Netherlands. The government provides a nice monetary incentive, which may allow companies to provide leaner packages for relocations and assignments specific to the Netherlands.
The 30% ruling is a tax advantage for highly skilled migrants working in the Netherlands. The ruling allows employers to offer 30% of an employee’s salary to them tax-free, meaning that the employee only pays tax over 70% of their gross Dutch salary.