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Expats lose out in court

TAX 23041 Post Expats vangen bot2

In short:

  • The benefit expats receive when coming to the Netherlands (the 30% ruling) has been limited to a maximum of 5 years since 2019. Prior to 2019, the duration was 8 years.
  • The duration of the ruling has also been shortened for existing expats who were already benefiting from the ruling before 2019 and believed they had an agreement for 8 years.
  • The court rules that this reduction is legally allowed.

Recently, the District Court of North Holland decided in a long-running case revolving around whether shortening the duration of the 30% ruling for existing users is permissible. Initially, the legislature aimed to shorten the duration for all existing users by three years. After criticism from the Council of State, limited transitional provisions were introduced, meaning not all expats had their duration reduced by the full three years. However, this transitional provision did not apply to everyone. An expat who arrived in the Netherlands after January 1, 2016, was not covered by it and suddenly lost three years of the benefit.

Tax advisors Hans de Vries and Maarten van den Beucken from Taxperience appealed against this at the tax court and argued on behalf of approximately 850 expats that the government had not made a careful consideration of interests. According to the involved expats, the Dutch government should stick to its agreement, and failure to do so violates international legal principles. "A deal is a deal and you keep your promises are two basic principles we teach our children early on," says De Vries. "Apparently, different rules apply to the Dutch government. The government's budget interests take precedence over the significant financial consequences that the premature ending of the ruling has for individual expats. Unfortunately, a sense of proportionality is still sorely lacking when it comes to government action."

Van den Beucken adds: "Unfortunately, the court ruled against us. We are studying the judgment and considering filing an appeal. We want to clarify whether the government has made a proper assessment, especially since this issue is not only relevant to this group of expats. This debate also arises with the recent restrictions in the ruling as of 2024, and the societal importance is not adequately recognized." In addition to the impact on individual expats, Van den Beucken also refers to the fact that the international business community is starting to view the Dutch government as less reliable. This was already warned about in the evaluation of the ruling conducted by the government in 2017.

Reliable and steady government policy regarding the ruling is of great value to businesses and employees. The reduction of the ruling for existing users in 2019 and the further measures since then undermine an attractive business climate and cause more damage overall. The effects are now clearly visible as ASML and other major companies sound the alarm, and the government launches project 'Beethoven' to try to retain (remaining) major companies that are important for the Dutch economy. Therefore, also in the context of project Beethoven, this ruling is not good news.

Court's ruling:
The court rules that there are no special circumstances that the government did not consider when the legislative change was made. Also, there are no justified expectations for an expat who has received a decision with a duration of eight years because it is stated that it is valid subject to changes in legislation and regulations. And there is no violation of international legal principles such as the principle of equality, non-discrimination, and the right to peaceful possession. The government simply has a wide margin of appreciation, and according to the court, it has stayed within that margin.