Agreed is agreed! Please honour the duration of the existing 30% rulings

On 20 April 2018 the Dutch Council of ministers agreed to change the 30% regime for expatriates once again, in line with the advice from an evaluation of the regime. Not surprisingly the 30% regime is further 'economized'.

Formal legislative process

The Council of ministers will include the intended changes in the Dutch tax plans for 2019, which will be published in September and will then follow the Dutch legislative process. The intended changes are therefore not fully crystalized yet, however considering the impact it can have on our respected highly skilled expatriates, we feel morally obliged to give our first views.

The 30% regime explained

In short, the 30% regime allows employers to reward a tax free expense allowance of 30% to highly skilled expats who move to the Netherlands to work here. The allowance is aimed to cover extraterritorial expenses (like travel costs for family visits, living expenses etc.). If all conditions are met, the Dutch tax authorities grant the 30% ruling upon request for max 8 years.

Reduced duration

According to the evaluation of the regime, expatriates on average do not stay longer in the Netherlands than 5 years, so the 8 year period for the 30% regime can be reduced to 5 years. The reduced duration is intended to apply to both new and existing cases from 1 January 2019, meaning that the 5 years period would be applicable to all existing 30% rulings with retroactive effect. Individuals who have agreed with the Dutch tax authorities that they can apply the 30% regime for 8 or 10 years, now suddenly lose up to 3 years of the tax free allowance for their extraterritorial expenses. That leaves them with a sudden change in their financial situation and thus a lot of uncertainty. Unsurprisingly that created quite some commotion in the expat community. What if you just bought a house based on the expectation that you would be eligible for the regime for 8 years, which now suddenly comes to an end in roughly 7 months? Can the Dutch government so easily decide to not respect their agreement with you and thus leave you in doubt whether you can still pay your mortgage in the future?

'They' seem to think so, but can they really?

Retroactive effect in tax law

The answer to that question needs to be sought in the European Convention on Human Rights, which Dutch courts are bound to apply. From well-established case-law from both Dutch courts and the European Court of Human Rights it can be concluded that States have a wide margin of appreciation in taxation matters and that the Courts will respect the State’s authority to change legislation that interferes with individual taxpayer’s rights, unless it is unlawful, lacks legitimate foundation or is disproportionate.

Lawfulness: A change of tax law is considered lawful if it is accessible, precise and foreseeable. Not surprisingly, one of the determining factors in many cases about the retroactive effect of tax law changes is whether the change was foreseeable. That is very questionable for the intended change of the duration of the 30% regime. Tax law can of course always change and the duration of the 30% regime has been reduced before. In 2012 the duration was reduced from 10 to 8 years after an amendment to the tax plan for 2012. This amendment was however accompanied with transition law to ensure that existing rulings were not impacted. I.e. the 10 years duration was respected for existing cases in 2012! In 2019 the Council of ministers intends to change the duration of the 30% regime again, but now without grandfathering existing rulings. Considering that the reduction of the duration in 2012 did not impact existing cases, it can very well be argued that the expats could not foresee that a new change of the duration of the regime would impact their existing case. If a change is not foreseeable, it is in principle unlawful. That conclusion does not necessarily change if individual 30% rulings include the reservation for changes in tax law.

Legitimate foundation: An interference of individual rights should of course be based on legitimate reasons. The change of the duration of the 30% regime is based on an evaluation of the regime, which provides the reasons for the change. The public interest in collecting tax in combination with the rationale of the regime, seems to justify the reduced duration.

Proportionate: There must be a reasonable proportionality between the public interest in securing the payment of taxes and the individual’s right to “the peaceful enjoyment of their possession”. In other words, a change of tax law must result in a fair balance between the interest of the individual taxpayer and the interests of the country. A change is considered disproportionate if it results in an excessive burden for individual tax payers. Whether the change of the 30% regime is considered proportionate by a judge is hard to predict. Fact is that the change can have a severe impact on the financial situation of the impacted expats and that impact can relatively easily be avoided by grandfathering existing rulings and introduce transition law like in 2012. Considering that both the impacted group of taxpayers and the financial impact for the country are relatively small, the change is not necessarily proportionate without question.


It is not only unfair to change the 30% regime for our well respected expats, it is also very questionable whether such change would not breach their human rights. Considering that the legislative process is still at very early stages, I urge the Dutch Council of ministers to ensure that the reduced duration only applies to new cases. Both as tax professional and as human being, I believe that we should avoid uncertainty for the people who bring unique skills to our country and thus honour our existing agreements with them. That can very easily be achieved by copy-pasting the transition law that was implemented in 2012, so that the existing 30% rulings will apply for the initially agreed 8 or 10 years.

Barend Broen

Barend Broen

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