Expat tax break to be shortened

Employers of expat employees who satisfy certain conditions may provide their employees with 30% of their wage tax-free. The government wants them to benefit from this 30% facility for 5 years. A transitional scheme will apply for the coming 2 years.

Allowance for additional costs

The 30% facility is available for employees who are recruited from outside the Netherlands to work here temporarily. If they satisfy the conditions, they need not pay tax on up to 30% of their salary. This government measure helps them cover additional costs resulting from working in the Netherlands, such as travel expenses, additional housing costs and day-to-day expenses.

Shorter duration

The government wants to shorten the duration of the 30% facility from 8 to 5 years from 1 January 2019 as part of the 2019 Tax Plan. Employees who arrive in the Netherlands on or after that date will enjoy the tax break for up to 5 years.

Transitional scheme

For existing cases a transitional scheme will be introduced. For them the changes will become effective on 1 January 2021.

Reasons for the shorter duration

The Ministry of Finance had the 30% facility evaluated by an independent consultancy in 2017. The evaluation concluded:

  • about 80% of expat employees use the facility for 5 years or less. Many of the remaining 20% are not in the Netherlands temporarily but stay for a longer period;
  • in other countries with a comparable facility, the tax break is often available for 5 years;
  • the additional costs covered by the 30% facility decline over time; 
  • a shorter 30% facility would be less expensive but still achieve the goals nearly to the same extent.

Ministry responsible