Dissention still brewing over Netherlands 30 per cent tax break ruling

After a final announcement about the controversial 30 per cent tax relief rule for expats, dissension is still brewing as those affected consider their financial options.

Protestors have won at least a single victory, in that there is now a transitional law affecting those whose cut-off point would have been in 2019 0r 2020. It’s still not certain how this will be achieved, but it seems Dutch lawmakers have committed to its introduction. Understanding exactly how much you will lose once your 30 per cent tax break expires is crucial to setting up your finances to cover the shortfall as much as is possible. As with ‘death and taxes’ only one thing’s certain – you’ll get less take-home pay.

For example, on a salary of €60,000, your taxable pay using the 30 per cent tax break is €42,000, whilst after the tax break ends you’ll be taxed on the full €60,000. In real terms, your actual tax paid whilst the scheme is still in operation is €17,157 with the 30 per cent reimbursement due at €18,000, making your net salary €42,843. After the end of the tax-free incentive, taking the same €60,000 gross salary, all of which is now taxable, the tax due amounts to €24,510, leaving your net salary at €35,490. Unsurprisingly, the difference between the two figures is enough to wreck even the most carefully designed financial plan, especially if there’s a family to support, children to educate and a mortgage to pay off.

Tax lawyers are now considering whether certain elements of the monthly salary such as year-end bonuses are able to be included in the 30 per cent rule during an employee’s transition period from having the bonus to loosing it. The general opinion is no, as the earning period for the bonus took place in the year in which the tax break was operational and the tax break applies only to actual wage payments during that year. Another problem may occur with partial non-tax residency, as the original ruling was advantageous when filing a Dutch tax return. Holders of the tax break are allowed to claim treatment as a partial non-resident for the purpose of Dutch tax liability. The non-resident taxpayer break applies to interest on savings and investments, meaning you’re only taxed on your Dutch earnings. Once the 30 per cent tax break ends, expats will be taxed on their worldwide incomes.

Given the complications arising from this vastly unpopular and, all believe, unfair ruling, expats living and working in the Netherlands are being urged to get legal advice from a tax lawyer as soon as possible.