The Dutch government said it will lower income tax to boost purchasing power

The Dutch government announced plans to reduce income taxes to boost purchasing power and reintroduce certain benefits for expatriates to enhance the country’s business environment.

As part of its Budget Day statement on Tuesday, the government said it will lower the income tax rate for the first bracket and introduce an additional tax band.

Additionally, the cabinet will restore many of the tax perks for expats that were scaled back last year. Under the new rules, expats will receive a tax exemption on 27% of their salary for five years, a reduction from the previous 30% benefit that parliament had curtailed.

This move is aimed at providing relief to Dutch businesses, particularly those dependent on foreign workers, such as ASML Holding NV and NXP Semiconductors NV, which had expressed concern over the reduced tax breaks.

“We received a lot of feedback,” said Finance Minister Eelco Heinen on Tuesday. “We saw that it was negatively impacting our business climate.”

The new Dutch government, formed in July after over six months of negotiations, is led by a right-wing coalition. Geert Wilders’ far-right Freedom Party, which campaigned on limiting migration, secured the most ministries in the cabinet.

“There are urgent concerns about migration, the overheated housing market, and family income,” said Dutch King Willem-Alexander during his Budget Day address in The Hague. He cited issues such as asylum migration, family reunification, labor migration, and an influx of students as reasons for the population growing faster than expected. “This is placing significant pressure on our resources,” he added.

Last week, the government pledged to tighten border controls, pause decisions on asylum applications, and threatened to deport individuals without residence permits, calling it the strictest migration policy in the country’s history.

Other key highlights from the Dutch budget include:

• The government confirmed the cancellation of a planned tax on share buybacks that was set to take effect next year.
• The state will increase military investments, raising defense spending to meet NATO’s 2% of GDP target.
• The transfer tax on non-primary residences will be reduced from 10.4% to 8% in 2026.