Expat tax break to be shortened
Expat employees who satisfy certain conditions need not pay tax on up to 30% of their salary. As of 1 January 2019 qualifying workers may use this 30% facility for only 5 years. A transitional arrangement will apply in 2019 and 2020.
Allowance for additional costs
The 30% facility is available to employees who are recruited from outside the Netherlands to work here temporarily. If they satisfy conditions for the 30% facility, they are exempt from paying tax on up to 30% of their salary. This government measure helps them cover the additional costs they incur from working in the Netherlands, such as travel expenses, additional housing costs and day-to-day expenses.
The government has shortened the duration of the 30% facility from 8 to 5 years. Employees who arrive in the Netherlands in or after 2019 will be able to apply the tax break for up to 5 years.
A transitional arrangement will apply to employees who were using the 30% facility prior to 2019. The changes will not apply to them until 1 January 2021.
Reasons for the shorter duration
In 2017 the Ministry of Finance had the 30% facility evaluated by an independent consultancy. The conclusions of the evaluation were as follows:
- 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 that the 30% facility is intended to cover decline over time.
- A shorter 30% facility is less expensive but is almost as effective.