Plans by the Netherlands to scrap a major tax break for foreigners have left expatriates in a spin at a time when the country is hoping to lure multinationals as part of a Brexit exodus.
Thousands of foreign workers face a big hit to their salary under the proposals, confirmed in September as part of Prime Minister Mark Rutte's 2019 budget.
The Dutch government says few foreign residents actually use the full tax break, but major firms - including brewing company Heineken - say the sudden cut will affect expats' financial planning.
The row comes at an awkward time for Mr Rutte's government, which is separately scrapping a dividend tax in a bid to attract international firms and cash in on Britain's departure from the EU.
The move has caused "a great deal of concern among the international community in The Netherlands," says the International Community Advisory Panel for the Netherlands (ICAP) - a bridging foundation between expats, local and national government.
The tax break was introduced in the 1960s to bring in foreign talent to the land of cheese and clogs, and to boost The Netherlands' investment climate.
It originally allowed a carefully-selected group of highly-skilled foreign workers to use the so-called "30-percent tax rule" - which exempts 30 per cent of their salaries from income tax - for a decade.
The tax rule has been a drawcard ever since and is there to help newcomers cover extra costs such as school fees and pensions.
It is applied however with the proviso that expats "temporarily" remain in the Netherlands.
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Read more:
Expats living in the Netherlands frustrated by shrinking tax benefit
Are you liable for income tax while living in the UAE?
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In 2012, the government cut the rule's running time from 10 years to eight - and two weeks ago, it said it was slashing a further three years, meaning newcomers can use the rule for five years.
But the government is also applying the change retroactively - meaning that thousands of expats already living in The Netherlands now stand to lose the tax benefit as early as January 1.
Many expats say within three months they could be out of pocket by as much as €800 (Dh3,383).
"We accept and support the right of the Dutch government to amend its tax legislation as it deems necessary," says Jessica Piotrowski, spokeswoman for lobby group United Expats in the Netherlands.
"However, enforcing this policy change on current recipients will have significant and severe consequences on these people and their families."
Founded last year, United Expats has garnered a petition with 40,000 signatures and raised more than €35,000 for a possible lawsuit.
"I think this is a huge mistake," one foreign resident says, who asked not to be named as he works for a major international tech company.
"You can't just change things when people believe they have an agreement with government. That's how you drop people into trouble," says another overseas resident, speaking on the same condition.
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Read more:
"Do I have to pay tax on UAE income when I return to the UK this summer?"
Should UAE expats ship their car home when they relocate?
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The Dutch government based its decision on the findings from a 150-page study published last year by a research group based in the city of Utrecht.
The report, which included a survey among 1,463 respondents, found that around 80 per cent of the recipients of the tax cut "don't use the benefit for more than five years".
Of those that do, around 20 per cent "actually settle in the Netherlands," meaning that the proviso of "temporary stay" no longer applies.
Finance ministry spokeswoman Heleen Haverkort says the 150-page report underlines the government's "point of view that the change to the rule should be implemented with immediate effect".
But many expatriates, a separate independent survey with more than 4,500 respondents, and major Dutch international companies like Heineken and top microchip machine maker ASML, all disagree.
The top companies backed a proposal by the Dutch umbrella group VNO-NCW - representing more than 100 business federations - as well as universities to implement the change over a three-year period.
Monique Mols, a spokeswoman for ASML, says that without the transitional period "the ruling violates an agreement."
"This is a problem. Internationals did their financial planning based on a government they thought was reliable. Now they find it's not the case," she says. "A deal is a deal."
In July, The National documented a number of foreign residents that were concerned by these new rules. Among them was Antonios Cheras, a Greek national, who moved with his family to the Netherlands five years ago due to the draw of an unbeatable tax break.
Mr Cheras, who last year bought a €400,000 house that will be ready to move into in December, says the pull-back hits both his pocketbook and his idea of Dutch fairness and stability. He now fears he might not be able to keep the house since he was counting on the tax break over three more years to service his mortgage.
“The Netherlands had a really good reputation - that the environment is stable here to develop, as a company, or as a person, but now I feel that’s not true,” said Mr Cheras.
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
The biog
Name: Dhabia Khalifa AlQubaisi
Age: 23
How she spends spare time: Playing with cats at the clinic and feeding them
Inspiration: My father. He’s a hard working man who has been through a lot to provide us with everything we need
Favourite book: Attitude, emotions and the psychology of cats by Dr Nicholes Dodman
Favourit film: 101 Dalmatians - it remind me of my childhood and began my love of dogs
Word of advice: By being patient, good things will come and by staying positive you’ll have the will to continue to love what you're doing
The specs
Engine: 5.0-litre supercharged V8
Transmission: Eight-speed auto
Power: 575bhp
Torque: 700Nm
Price: Dh554,000
On sale: now
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
At a glance
- 20,000 new jobs for Emiratis over three years
- Dh300 million set aside to train 18,000 jobseekers in new skills
- Managerial jobs in government restricted to Emiratis
- Emiratis to get priority for 160 types of job in private sector
- Portion of VAT revenues will fund more graduate programmes
- 8,000 Emirati graduates to do 6-12 month replacements in public or private sector on a Dh10,000 monthly wage - 40 per cent of which will be paid by government
WISH
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How Filipinos in the UAE invest
A recent survey of 10,000 Filipino expatriates in the UAE found that 82 per cent have plans to invest, primarily in property. This is significantly higher than the 2014 poll showing only two out of 10 Filipinos planned to invest.
Fifty-five percent said they plan to invest in property, according to the poll conducted by the New Perspective Media Group, organiser of the Philippine Property and Investment Exhibition. Acquiring a franchised business or starting up a small business was preferred by 25 per cent and 15 per cent said they will invest in mutual funds. The rest said they are keen to invest in insurance (3 per cent) and gold (2 per cent).
Of the 5,500 respondents who preferred property as their primary investment, 54 per cent said they plan to make the purchase within the next year. Manila was the top location, preferred by 53 per cent.
Section 375
Cast: Akshaye Khanna, Richa Chadha, Meera Chopra & Rahul Bhat
Director: Ajay Bahl
Producers: Kumar Mangat Pathak, Abhishek Pathak & SCIPL
Rating: 3.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
