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.
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.
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.