The challenges an expat faces in the Netherlands and how the employer can support

Moving to the Netherlands is an exciting adventure, but it comes with significant financial challenges, especially for the growing number of expats who are becoming increasingly integral to Dutch organizations. Understanding the Dutch tax system, managing a higher cost of living, and planning for retirement can be daunting. Employers must recognize these challenges and consider making a strategy to prevent unnecessary stress and costs. By providing financial planning support, employers can support expats in managing their personal finances effectively.

Main Takeaways:

1. Expats face complex financial challenges when moving to the Netherlands, including the tax system, understanding the cost of living, and adjusting their retirement and real estate planning.

2. These challenges will indirectly and directly have impact on your employee. Financial stress and taking the time to deeply understand all possibilities and opportunities takes significant time, also during working hours.

3. Employers should be proactive in supporting expats by offering financial planning and coaching as part of their benefits package.

Understanding the financial implications of moving to the Netherlands

There are many examples of financial implications when moving to another country, but we have listed the most common and important ones to give you an idea of the task an expat is up for.

1. Navigating the Dutch tax and allowance system
One of the first challenges expats encounter is the Dutch tax system, which can be complex and unfamiliar.

• The 30% Ruling: For qualified expats, the first 30% of their income can be tax-free for up to five years. This benefit is designed to help expats offset the costs of relocating and living in the Netherlands. However, since 2024 this rule has changed and is more complex. The ruling is often presented as an amazing benefit while its downsides are often minimized or ignored; it takes a professional to find out what the best options are for each individual.

• Other taxes: Such as vehicle tax, inheritance tax, gift tax, and gambling tax. On the flip side, there are also tax benefits, such as child allowances or healthcare subsidies. An expat should be aware of all this, since they must be applied for.

• Tax returns: Expats must file an annual income tax return with the Dutch Tax Authority. This process can be complicated, especially if you have income from multiple sources or countries. Moreover, all key terms and explanations are in Dutch, which leaves some expats lost in translation.
  
  

2. Coping with the cost of living
The cost of living in the Netherlands can be a shock for many expats, particularly those coming from countries with lower living expenses.

• Housing costs: Finding a residence in the Netherlands is challenging and often comes at an extraordinary price, especially in major cities like Amsterdam or The Hague. The housing market is competitive, and prices can be far higher than what many expats are accustomed to.

• Daily expenses: Beyond housing, everyday costs such as groceries, transportation and the public transport system, and utilities are also typically higher than in many other countries. Expats need to budget carefully to adjust to these new expenses.
  
  

3. Understanding pension and retirement
The Dutch pension system is notoriously complex, even for locals.

• The three-pillar system: Understanding how these pillars work and how they apply to expats can be confusing and requires detailed explanation.

• Impact on foreign pensions: Expats need to consider how their time in the Netherlands will affect their pensions, particularly if they have retirement savings in other countries. The length of stay and the rules of their home country can significantly influence their retirement planning.
  
  

4. Other Financial Considerations
Several other financial factors need to be considered when moving to the Netherlands:

• Opening Dutch bank accounts: To receive a salary, pay rent, and manage other financial transactions, expats must open a Dutch bank account. Additionally, they will have to spend time opening and doing research for a savings- and an investment account.

• Insurance: Health insurance is mandatory in the Netherlands, which thus costs money and researching time. If you would like other insurances too, this again costs extra money and time to figure out which insurance suits them best.

• Family considerations: Bringing a partner or children to the Netherlands can double the financial burden. Schooling, insurances, and daily living expenses can add up quickly.

These financial implications can heavily impact an expat’s financial planning. Expats need to adjust their retirement savings, align with Dutch tax rules, and consider estate planning, especially if they have assets in multiple countries.

How Employers Can Support Expats

Given these challenges, employers play a crucial role in supporting their expat employees, making financial planning and coaching a vital part of any benefits package. As the primary source of income, employers have a responsibility to help expats manage their finances effectively. By offering targeted support, employers can alleviate the unique financial challenges expats face and help them make informed decisions.

Offering financial planning as a benefit can be transformative, providing personalized guidance that helps expats navigate the Dutch system, make informed decisions, and gain confidence in their financial future. Without this support, expats may make costly mistakes, and it could take longer for them to fully integrate and perform at their best. Moreover, with support, they can increase their financial security which increases their productivity.

Additionally, the costs associated with expats spending time stressing over and researching finances can be substantial. For example, an expat could be spending two hours per week during their first three months navigating finances. Based on an average salary of €50,000, this 5% of working time spent on personal finances will cost an employer approximately €625, per expat! To address these issues comprehensively, employers should consider partnering with financial planning platforms like Equip, which offers personalized financial planning along with a range of resources such as blogs, webinars, and one-on-one meetings—all available in English.

Conclusion

Moving to the Netherlands presents numerous financial challenges for expats, from understanding the tax system to managing the higher cost of living. Employers have a responsibility to be aware of these challenges and to offer the necessary support to help expats thrive. By providing financial planning and coaching as part of their benefits package, employers can make a significant positive impact on their expat employees' financial well-being.

Enter Equip. Our platform provides expats with the financial guidance they need, all in English. From in-depth articles to personal coaching sessions, we ensure that expats have the tools they need to succeed financially in the Netherlands.