Why the Netherlands must protect and expand its expat regime

The Wennink report sounds a clear alarm: the Netherlands is losing ground in the global competition for talent. In this article from our series on the Wennink report, we examine the fiscal expat regime (formerly known as the 30%-facility), how it has been curtailed over the past years, and why the new coalition agreement offers cautious optimism for the future.

Wennink described in his report that the Netherlands faces a structural labor challenge. With approximately two workers per pensioner in fifteen years’ time - down from seven workers per pensioner - the country simply cannot afford to let its talent pipeline dry up.

The expat regime is a tax facility for employees recruited from abroad to work in the Netherlands. Under the regime, employers may grant eligible employees a tax-free allowance of up to 30% (27% as of 2027) of their salary, intended to compensate for the extraterritorial costs of living and working away from their home country. Effectively, this results in a lower income tax burden for the relevant employee, which makes the Netherlands more attractive as a destination for international talent.

To qualify, employees must meet certain conditions, including a minimum salary threshold and having been recruited from outside the Netherlands (i.e. at least 150 kilometers from the Dutch border). The regime has long been a cornerstone of Dutch talent attraction policy, helping the country compete with destinations like Switzerland, Singapore, and the United States for top-tier knowledge workers.

Despite its importance, the expat regime has been under continuous political pressure and has been significantly curtailed over the past years:

Duration reduced to five years: Before 2012, the ruling could apply for a maximum of ten years. From 2012, this period was reduced to eight years and from 2019 to only five years.

Cap introduced: The tax-free allowance was uncapped, but since 2024 the expat regime only applies to the wages up to the so-called “WNT-norm” (the salary cap for senior public sector officials), currently EUR262,000. For employees earning more than this threshold, the expat regime does not apply to the excess.

Partial foreign taxpayer: As of January 1, 2025, expats can no longer opt to be treated as partial foreign taxpayers for Dutch income tax purposes (transitional rules apply until January 1, 2027, for expats that already applied the rules in 2023). Under the partial foreign taxpayer rules, expatriates using the expat facility and living in the Netherlands could largely remain outside the scope of Dutch taxation on income from substantial interest holdings (box 2) and income from savings and investments (box 3), as only the income and gains from real estate located in the Netherlands and the income and gains from shares in a Dutch entity were included in the Dutch income tax base.

These cumulative changes send a troubling signal to the international talent market. As the Wennink report notes, fiscal regimes for knowledge workers in the Netherlands “are continuously being curtailed under political pressure.”

The erosion of the expat regime comes at the worst possible time. The Wennink report positions talent as one of the four essential preconditions (randvoorwaarden) that must be strengthened to enable the large-scale investments the Netherlands needs. Without international knowledge workers, the country cannot make progress in the critical technological domains identified in the report: digitalization and AI, security and resilience, energy and climate technology, and life sciences and biotechnology.

The report therefore explicitly recommends retaining and broadening tax benefits for knowledge workers, including the expat regime.

The coalition agreement between D66, VVD, and CDA, published on January 30, 2026, offers grounds for cautious optimism. In a clear departure from recent policy trends, the agreement explicitly states that “we will not further curtail the expat regime”. Note that the Wennink report seems to imply that the expat regime should be broadened, whereas the coalition agreement only states that it will not further cut back the regime. As a result, it is not yet clear whether this also means that the regime will simply remain as is, or that recent curtailments will be reversed and new expansions will be explored.

On a positive sidenote: the coalition agreement emphasizes the importance of stable fiscal policy for businesses, noting that “often-discussed schemes important for businesses” should be maintained to ensure a level playing field. This includes the expat regime alongside other provisions like the innovation box (innovatiebox), the participation exemption (deelnemingsvrijstelling) and the R&D tax credit scheme (WBSO).

The expat regime is not a simple tax giveaway, but a successful tool to attract international talent to come to the Netherlands. The Wennink report recognizes this, the coalition agreement acknowledges it, and now it is time for policy makers to follow through. Preserving the expat regime in its current (already diminished) form is necessary but probably not sufficient. Reversing recent curtailments and exploring expansions, whether through longer durations, higher caps, or simplified procedures, would send a powerful signal that the Netherlands is serious about winning the global talent race.