Dutch Budget Deal for 2027: Social Security Cuts Reversed, But Workers Foot 97% of Tax Bill – What Expats Need to Know

The Dutch minority cabinet led by Prime Minister Rob Jetten (D66) has reached a budget deal for 2027, reversing most planned social security cuts and allocating €1.5 billion to protect purchasing power. But the government’s own watchdog warns that nearly all of the €6 billion in tax increases will be paid by workers – a stark contradiction to the cabinet’s slogan that “work must pay.”

For expats living in the Netherlands, the deal brings mixed news: a temporary reprieve from cuts to benefits and the state pension (AOW), but higher income taxes and continued uncertainty around the taxation of savings and investments (box 3).

What’s in the deal?

After days of intense negotiations, the coalition of D66, VVD, and CDA – which governs without a majority in both the Tweede Kamer (lower house) and Eerste Kamer (senate) – agreed to scrap the planned €2.8 billion cut to the AOW (state pension), reverse most of the proposed 20% reduction in the daily wage cap for benefits, and postpone the halving of unemployment benefit duration (from 24 to 12 months) until 2029. The healthcare deductible (eigen risico) will also stay at its current level for another year. Source: NOS

These changes cost money, so the cabinet is raising taxes on higher incomes by €750 million, and introducing other increases totalling €6 billion for 2027. Source: NL Times

The Council of State’s scathing critique

The Council of State (Raad van State), the government’s highest advisory body, reviewed the budget and found that 97% of the €6 billion in tax increases will be paid by working citizens – primarily through income tax hikes. Meanwhile, taxes on large corporations and high-wealth individuals are actually decreasing slightly. The council warned that placing the bill on a shrinking workforce is unsustainable as the population ages. Source: NL Times

For expats who are employed in the Netherlands, this means your income tax burden will rise in 2027, while the government’s own advisors say the policy contradicts its promise that working should pay off.

Box 3 asset tax reform delayed again

One of the most frustrating issues for expats with savings or investments is the ongoing saga of box 3 – the tax on assets. The Supreme Court ruled in 2021 that the old system, which taxed fictional returns at a flat rate, violated human rights. The cabinet has been trying to replace it with a system based on actual returns, but the new bill is likely to be withdrawn from the Senate after criticism from opposition parties. The reform will likely be postponed until 2029, meaning the interim system – with different fictional rates for savings, investments and debts – remains in place. Source: DutchNews.nl

For expats, this means you will continue to pay tax on a fictional return, and you may still need to claim a refund if your actual returns are lower. Uncertainty persists, and anyone with substantial assets should seek advice.

What does this mean if you hold a residence permit?

If you are living and working in the Netherlands on a residence permit, the most immediate impact is on your income tax and your eligibility for benefits. The reversal of social security cuts means that if you become unemployed or disabled, your benefit will not be slashed as deeply as originally planned – but the reduction is still 7.5% instead of 20%, and the maximum duration of unemployment benefit (WW) will remain at 24 months for now.

However, the increase in income tax will reduce your net salary. The cabinet is counting on support from opposition parties – especially the pro-agriculture BBB – to pass the budget in parliament. Without a majority, the deals are fragile. If the budget fails, the cabinet could fall, triggering new elections – a scenario that would create uncertainty for everyone.

The bigger picture

Prime Minister Jetten has presented the deal as a “handreiking” (olive branch) to opposition parties, but the Council of State’s harsh criticism undermines the cabinet’s narrative. The government has also faced legal setbacks on asylum policy – a Dutch court ruled that asylum seekers cannot yet be returned to Italy under the EU migration pact. Source: NOS

For expats, the message is clear: the cost of the budget deal falls on your shoulders. While short-term benefit cuts are avoided, the long-term tax outlook for workers is worsening. And if you have assets, the box 3 confusion continues.

What to do now?

Check your income tax bracket for 2027 – the exact rates will be published on Prinsjesdag (the third Tuesday in September). If you own a home or have investments, monitor the box 3 developments and consider consulting a tax advisor. And if you rely on benefits, the current changes give some breathing room, but the structural reforms have only been postponed, not cancelled.

The budget will be debated in parliament in the coming weeks. If you have a residence permit, your right to stay is not directly affected, but your financial planning should account for higher taxes and continued uncertainty on asset taxation.