The 30% tax ruling – what’s changed?
If you’re an expat but have been living under a rock for the past few weeks, you may not have heard that the Dutch government is making changes to its “30% reimbursement ruling,” and boy has it p**sed people off! If you’re not sure what the 30% tax ruling is all about, then you are probably a Dutch or EU citizen, or you are not a ‘highly-skilled’ migrant.
The ruling states that, when necessary conditions are met, the employer (who applied for your visa) can grant a tax fee allowance equivalent to 30% of the salary, subject to Dutch payroll tax. This means that you would only be taxed on 70% of your gross income – a tax advantage meant to attract expats to the Netherlands. As you can imagine, a lot of expats depend on this ruling to “make the numbers work,” so to speak, and making changes to it can really impact your plans.
Why are people so angry about it?
The main issue, as has been discussed on Reddit, Facebook, Twitter, and at the water cooler, is not the fact that the Dutch government is reducing the amount of time that you’re allowed to claim the benefit – from the current eight years to only five – but the fact that they are planning to make the change retroactive. Which means that if you have been in the Netherlands for three years, instead of having five more years of the 30% tax ruling, you will have only two years remaining. Expats are fighting this in the form of a petition to stop this new rule from going into effect on January 1, 2019. As of this writing, the petition has already gathered nearly 24,000 signatures, and a GoFundMe campaign has raised over €10,000 for legal fees – wait, is that taxable as part of the 70%?
The issue with making the 30% tax ruling retroactive
Being upset is understandable. While the government can change any law to suit its needs, making this law retroactive makes it difficult for that expat who just spent their life savings on a beautiful and expensive apartment in Amsterdam, and their mortgage was based on their net income based on the 30% tax ruling. Now they either need to make more money more quickly, or sell their apartment when their time runs out three years earlier. It seems like the Dutch government is not only telling expats “we don’t need many more of you,” but also adding “also, get out now.” That’s the argument Mike Arthur, one expat behind the online movement, makes on the change.org page. “by making the decision retroactive, many Dutch expats, some who have had children or purchased homes with their financial plans based on an 8 year 30% ruling, are now in a[n] incredibly frustrating position.”
Some expats believe the tax change is not fair because they don’t use the same services as a local, so they should be taxed at a lower effective rate. In the Amsterdam Expats Meetup Group on Facebook, expat Carlos Ley says he shouldn’t have to pay for the roads since there’s a road tax, the doctor is covered by private insurance and not public money, and he doesn’t have kids in public school so he shouldn’t pay for that either. He does make some good points, but there is more to the issue than just paying for what you use.
Why we should also be thankful
At the risk of sounding controversial and speaking against “my own people” (my wife is subject to the 30% ruling), I believe that many expats are approaching this with an outsider mentality. In my short time in the Netherlands, I’ve learned that the only thing the Dutch care about more than beer and football is their community. The Dutch have created an idyllic society, with low crime and unemployment, investments in infrastructure, a highly-educated population, all the while still recognizing that they are a part of a community, and are not just individuals like people in many other countries believe.
This is why we expats came here – well, that and the weed. We love the Netherlands because it’s an idyllic society where the trains run on time, there is practically no homelessness, and you can go out for a stroopwafel at night without worrying about getting mugged. That all takes money! The community pays the cost even if some individuals don’t use each service.
The Netherlands and us
In addition, the government has to appease its local population, not the 60,000 expats affected by this change who can’t vote the politicians out of office. The world is in the middle of a nationalistic phase, and local politicians are pressured, perhaps not to the extent as those in Germany or the UK, to take care of matters at home before solving issues for foreigners. For the record, I’m not in favor of making this new time limit retroactive.
I do believe it will hurt people who have mortgages and can’t move so easily. But I also recognize that I’m a guest in this country and that the government needs to focus on its people first and foremost, not on a guy who lives in “The Dam,” roams the streets looking for the best appeltaart, and will be gone in a few years. The government has told me “welcome,” and all I can do is respond “thank you.”
What do you think about the 30% tax ruling? Let us know in the comments!
That’s not all, when I came to the Netherlands I came with a good salary but just good enough to make me pay for rent, health, basic bills (light, gas, etc) and food for me and my wife.
We don’t travel, we don’t save money yet, because we are a couple, earning just enough to live and my wife is not working also yet.
When I came here, that was a sacrifice I was willing to have because I knew 8 years would be enough for me to get settled. Maybe a single person can save tons of money and buy a House in their first years, but I don’t see that happening for me in 5 years, 8? maybe. But for sure not 5.
Dear writer of this article. I find it interesting how you associate yourself with the expats, and then make some claims on their behalf.
I don’t have “a beautiful and expensive apartment in Amsterdam” and I am ok with paying taxes for all those things you mentioned that are nice about the Netherlands. Still, all my decisions up till now were taken on the certainty that I would have the 30% ruling for a stated given period, defined in the law, and written in the decision received.
Trains are on time??? In which Netherlands do you live?
This all boils down to economics. Someone with access to the expat census should start looking into crunching the numbers of what it means to Holland economically if a number of expats suddenly bail and go back to their home country vs. staying and paying the extra tax cost. One other issue that is not being brought out is that buried in this new legislation is that fact that all residents of Holland, this means all expats, will be taxed on their worldwide assets! (Pensions plans and 401k plans are exempt. But if you have money in the bank or stocks and bonds, you will be taxed on the value of those assets. This is totally unfair!!!!
Like all governments, I think this ruling is very shortsighted and only speaks to the ‘popularity’ of the current nationalistic situations in the world.
Bottom line; crunch the numbers and see what comes out in the wash. Don’t forget, with expats leaving, it also affects the following:
– Company’s lose highly skilled workers
– company’s cover the shortfall (like Philips NV is doing) and thereby reduces company profitability
– Dutch nationals who rent properties
– restaurants and businesses where expats spend money
– road tax, canal cleanup tax, and other taxes
– loss of students in expat schools
– if you bought a home, would you just walk away and leave it in the hands of the bank? (like so many did during the financial crisis). This will bring down the overall property value market in Holland.
– I’m sure there are more but this is all I can think of off the top.
I Agree with the author of the article : we are guests and we should behave as such. It is take it or leave it….However what no normal person does with guests is to invite them for a nice dinner and in the middle of the course tell them they should stop eating….That is gross…Yes, in any version (retroactive or not) it sounds very “fair” to the individual Dutch people and their pride is giggling at this thought…Probably it should have not existed at all….Once it is there and is being revoked retroactively the question is not about fairness but about the wisdom degree of the decision taken by the Dutch government? The retroactive change is going to affect 17.500 foreigners and it is below half a billion saving for the government; First, I would like to understand which financial difficulty is the government trying to solve with recovering this money from expats? is there any crisis out there? In my opinion what the retroactive application mostly does is that it disrupts the trust in the government and creates a dangerous precedent for the future. And this is something far more valuable then half a billion EUR which is less than 1% of the national GDP.
dutch govt doing the right thing. they are giving enough time, by that time probably you can be a dutch citizen as well. expats will have 5 years to raise their income if they are making just enough to sustain at the moment. expats not gonna leave because of this.
yes i agree, it will be uncomfortable for those people who just bought a home and now suddenly have 2 years instead of 5. but i am sure if they can buy a home, they can manage it eventually 😉