Prinsjesdag, on the third Tuesday in September, sees the presentation of the tax plans for the coming year(s). For many expats living in The Netherlands, this years’ Prinsjesdag must have been the first one they anxiously awaited. I am sure they are disappointed. The government has decided that there will be no exception for current beneficiaries of the 30%-facility as to the reduction of the grant period.
Any expat who has completed a five year period as per January 1st of 2019, will see his/her 30% facility end. A hard call, especially for family cash flow and pending financial obligations. There is one exception: if the expat’s employer already reimburses the international school costs for the employee’s child(ren), this tax-free reimbursement may continue for the original 30%-facility term.
Some expat employees may be of the opinion that their employer should bear the burden of the premature loss of the 30%-facility and that the employee’s salary should be increased to neutralize the effects of the present measure. This subject (who is to bear the burden) is not a fiscal issue, but an employment law issue. The outcome of this question very much depends on the specifics of the employment relationship, both contractual and factual.
The present measure to reduce the term for the 30% facility bears another disadvantage for expats: whilst they are under the 30%-facility, their wealth in most cases is tax exempt for the Dutch Box 3 wealth tax. Once their 30%-facility ends, they will become fully subjected to this taxation: it is an annual taxation of 0,86% to 1,61% on their wealth balance: it includes all assets and debts worldwide, with the exception of the main residence house (eigen woning) and the mortgage debt on it, and most tangible properties. For foreign real estate, tax credits are in most cases available. This Box 3 fact may however add an additional financial burden to the loss of the 30%-facility. The good news is that, in some cases, legal solutions are available to avoid or reduce this wealth tax burden. For an individual advise on that matter, please do not hesitate to contact us.