Expats Set To Lose Valuable Tax Breaks

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Expats could lose one of the most valuable tax breaks in Europe if The Netherlands government goes ahead with proposals to shake up the tax system.

Providing they follow strict rules, expats can earn almost a third of their salary tax-free in The Netherlands.

But the government may scrap the Dutch 30% ruling after a review reported the tax break was too generous and cost the country 902 million euros in tax refunds last year.

The review recommended cutting the benefit by capping what expats can claim by limiting the tax break to 20%.

But rather than cap the tax break, the government is thinking about slashing the timescale the benefit is available from eight years to five years.

Dutch income tax break

To claim the tax break, expats must:

  • Earn more than 37,000 euros a year
  • Live 150 kilometres or more outside the borders of The Netherlands

If they qualify, 30% of an expat’s salary is tax-free for the first eight years they work in the country.

The proposals are not due to take effect until 2019.

Meanwhile another expat tax grab planned in Portugal seems to have been dropped – at least for the time being.

The Portuguese government announced changes to the popular Non-Habitual Residency program (NHR) that called for a tax on pension income.

The proposal was for a flat rate tax of 5% or 10% for new expats taking up residence in Portugal under the NHR scheme, but no pension tax for expats already settled under the scheme.

Portugal pension tax

The measure is missing from the government’s draft budget.

This does not mean the pension tax threat is dead, just that the plan may be on the back-burner for now.

Experts believe the pension tax would mean renegotiating double taxation treaties with several countries before introduction of the tax.

However, Portugal is thought to be facing increasing pressure from other EU states to introduce the tax as pensioners in Portugal are receiving special financial treatment.

Expats from Finland settled under NHR already face paying tax on their pensions from 2019, while Portugal finance minister Mario Centeno has pledged to introduce standard taxation of foreign pensions.

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