The Netherlands will abolish the partial foreign tax liability for expatriates starting January 1, 2025. A transitional arrangement will apply for expats who utilized this tax scheme in their income tax by the end of 2023, allowing them to continue until the end of 2026.
Foreigners with assets temporarily working in the Netherlands may face double taxation due to this abolition, tax experts warn. Expats residing in the Netherlands and benefiting from the 30% ruling can utilize the partial foreign tax liability in their Dutch income tax return. They are considered foreign taxpayers for Box 2 and Box 3, despite residing in the Netherlands.
Critics fear that the elimination of this scheme will deter foreign executives from coming to the Netherlands, resulting in a decrease in corporate tax revenue from multinationals. Sebastian Spauwen, a wage tax expert at Deloitte, notes that expats may encounter double taxation starting next year. In Box 3, capital income such as interest and dividends, as well as unrealized capital gains, will be taxed. Spauwen explains, “Abroad, this occurs only upon realization of such capital gains. This discrepancy means that, for instance, Americans will have to pay taxes on this profit in both the Netherlands and the United States.”
Tax experts Aart Nolten from Deloitte and Karima Taouil from EY confirm Spauwen's assessment. In contrast, Pieter Grinwis, a member of the Dutch Parliament from the ChristenUnie party, argues against the abolition. Grinwis, who proposed the amendment that led to the elimination of the partial foreign tax liability, states that the tax authorities have long regarded this scheme as a 'remarkable tax construct.' He argues, “Due to differences in tax systems, income from assets is sometimes not taxed anywhere. We find double non-taxation unjust and undesirable.”