Recently, according to the statistics from the Netherlands Bureau of Statistics, the number of foreign immigrants in the Netherlands has significantly decreased in the past year, having a huge impact on Dutch society. The parliament’s approval of the cancellation of the special tax exemption policy for foreign immigrants has made it more difficult for international high-tech companies to recruit high-skilled immigrants.
In the past year, approximately 330,000 foreign immigrants came to the Netherlands, which is a 17% decrease compared to the previous year. Most immigrants come to the Netherlands for work, education, or family reunification, with fewer seeking asylum. Among those seeking asylum, a significant number are Ukrainian refugees (20,000) who, due to the Russia-Ukraine conflict, can immediately obtain refugee status and residency rights upon arrival without needing to apply for asylum.
For high-skilled immigrants, integrating into Dutch society hasn’t been easy. Despite the overall attractiveness of the Dutch environment for high-skilled individuals from certain countries, upon arrival in the Netherlands, these new immigrants struggle to find suitable housing due to a severe housing shortage, along with challenges related to language and other aspects that make their social integration more difficult. Particularly after the recent elections, many Dutch people view immigrants and refugees as the main cause of social housing tension, uneven distribution of public resources, and other social issues, putting immense pressure on immigrants.
Earlier this year, the parliament approved a motion by the cabinet to cancel the special tax exemption policy for high-skilled immigrants, putting additional financial burdens on them. Coupled with the societal pressures, some new immigrants are feeling lost and uncertain about their future paths.
The Netherlands Economic Institute (SEO) pointed out in a report that cutting back on the 30% foreign immigrant tax rule will lead to a reduction in knowledge immigrants in the future, with an estimated decrease of around 15%.
For many years, high-tech immigrants have enjoyed a special tax exemption policy where they are exempt from paying 30% of their personal income tax for the first five years in the Netherlands. In 2022, approximately 110,000 foreign individuals benefited from the 30% tax exemption policy. Following the 2023 elections, at the initiative of the left-wing coalition (GroenLinks-PvdA), Christian Union (ChristenUnie), and New Social Contract Party, the cabinet proposed to the lower house to terminate this tax exemption policy. In early 2024, the lower house approved the motion. As a result, new foreign high-tech professionals in the Netherlands can only enjoy a 30% tax exemption within the first 20 months after arrival; for the subsequent 20 months, they are eligible for a 20% tax exemption, and for the following 20 months, only a 10% tax exemption.
Researchers argue that abolishing or reducing the 30% tax exemption policy could have negative implications on tax authorities, as the new method of calculating personal income tax may not necessarily increase tax revenues for the tax office. Additionally, without tax relief policies, some international companies may be less inclined to continue investing in the Netherlands.
Some business associations in the Netherlands, such as VNO-NCW, MKB-Nederland, and FME, have expressed concerns that abolishing or reducing the 30% tax exemption policy may not be beneficial for the future of business. VNO-NCW’s chairperson, Ingrid Thijssen, emphasized the critical role that both large and small innovative companies play in maintaining the prosperity of the Dutch economy and high-wage jobs. They compete globally for scarce top talent, especially in the technical field. Other countries are also actively vying for these talents, and they offer various tax incentives. Therefore, “if we want to become a true knowledge economy, the 30% tax benefit is indispensable.”
FME’s chairperson, Theo Henrar, stressed the importance of Dutch companies maintaining innovation and competitiveness globally. To achieve this, foreign technical talents are essential. “Over the years, the 30% plan has made a decisive contribution to ensuring the Netherlands remains attractive to high-tech talents.”
According to EenVandaag, the Chamber of Commerce presented opposing views to the lower house in March 2024. Some political parties, such as Democrats 66 (D66), Farmers’ Party (BBB), and Christian Democratic Appeal (CDA) also support the Chamber of Commerce’s stance against abolishing this tax exemption policy. The leader of the Christian Democratic Appeal, Henri Bontenbal, told EenVandaag, “This is not a good idea.” We are actually in a predicament. We want to retain highly educated graduates and attract more cutting-edge talents, but suddenly removing this tax benefit policy has backfired.”