Extraterritorial expenses may be reimbursed tax-free. Employers are permitted to pay employees – provided that they meet the conditions for seconded employees – a tax-free expense allowance equalling no more than 30% of the salary, including the amount of the allowance. These extraterritorial expenses do not have to be demonstrated. If the employee does not meet the conditions for seconded employees, only the actual expenses incurred – within reason – in respect of the employee's residence abroad may be compensated free of tax.
Example
The salary excluding the allowance is € 40,000. The tax-free expense allowance for extraterritorial expenses is calculated as follows: 30/70 x € 40,000 = € 17,143.
If the actual extraterritorial expenses are higher than this fixed 30% standard, the employer is permitted to compensate the actual expenses incurred tax-free instead of paying the fixed maximum amount calculated by the above method.
In addition, school fees can be compensated tax-free. School fees are costs that seconded employees incur for the primary or secondary education of their children at an international school or the international section of a non-international school. 'School fees' are the amounts that the school charges for tuition. The costs of transporting the children to and from school may also be included in the fees. Board and lodging costs are not regarded as school fees.
