Extraterritorial costs that you may reimburse or provide tax-free
The extraterritorial costs include costs such as the following:
- the additional costs incurred for maintenance resulting from the higher cost of living in the Netherlands as compared to the country of origin (cost of living allowance)
- the costs incurred in travelling to the Netherlands to become acquainted with the country, where relevant by the employee and the employee's family, for example to search for a home or school
- the costs incurred in applying for or converting official personal documents, such as residence permits, visas and driving licences
- the costs incurred in arranging for the medical examinations and vaccinations required for the stay in the Netherlands
- the costs incurred for double accommodation, for example when the employee continues to live in the land of origin, such as hotel costs
- the (1st) accommodation costs
Only the (1st) housing costs that exceed 18% of the wage from present employment are deemed extraterritorial costs.
- the costs for storage of the part of the household effects that will not be moved to the country of employment (long-term storage)
- travel expenses incurred travelling to the country of origin, for example for a family visit or family reunion
- the additional costs incurred in arranging for the completion of the income tax return when these costs are in excess of the costs incurred in arranging for the return to be completed by a comparable tax consultant in the country of origin
For 2021 this is still limited to a maximum of € 1,000 for each employee. This maximum will cease to apply as from 1 January 2022. You can read more about this under 'Additional costs for the income tax return'.
- the costs the employee and members of the employee's family accompanying the employee to the Netherlands incur in following courses to learn Dutch
- the additional (non-business) costs incurred in making telephone calls to the country of origin
- the costs of applying for social security exemption, such as a so-called E 101 certificate or an A1 form/certificate of coverage (CoC)
- the costs of applying for the 30%-facility
School fees are also considered to be extraterritorial costs, but you can provide a separate allowance to your employee if it concerns school fees for an international school or an international department of a regular school. This is the case if:
- the education programme of the school concerned or the department thereof is based on a foreign school system
- the school or the department is intended especially for children of employees posted abroad
The school fees allowance is therefore unrelated to the 30%-facility.
Costs that are not extraterritorial
The following costs are not extraterritorial costs and, consequently, you may not issue tax free reimbursements or provisions for these costs:
- secondment allowances, bonuses and comparable reimbursements (foreign service premium, expat allowance and overseas allowance)
- capital losses in the state of residence
- purchase and sales costs of a home (reimbursement expenses purchase of the house, brokers fee)
- compensation for higher tax rates in the Netherlands (tax equalisation)
Reimbursement of the actual costs
You may issue tax free reimbursements for the actual costs incurred only when you can make plausible that the total extraterritorial costs are higher than 30% of the wages inclusive of the reimbursement. These are not then governed by standards or limitations.
Additional costs for the income tax return
Does your employee come from another country? And do you pay the costs for the filing of your employee's income tax return? If so, this is considered taxable wages (wages in kind). In the event of extraterritorial costs, a specific exemption applies. As regards the value of this taxable benefit, you could still assume a maximum amount of € 1,000 for the year 2021, if you had no invoice or an insufficiently itemized invoice. From 1 January 2022, you must assume the invoice value. If your invoice is not sufficiently itemized, you must reconstruct the value of the wage in kind. You must do so on the basis of a requested specification or otherwise.
What are the costs for filing a tax return?
The costs for filing a tax return include:
- the costs for filing
- the costs of applying for a provisional assessment
- the costs of assessing the issued assessment or assessments
- any costs to ensure the tax return is filed with the correct form
The costs for filing a tax return does not include:
- the costs of objection and appeal
- the costs for the income tax return of the employee’s partner
- the costs for filing any foreign tax return
- the costs of consultancy in relation to housing
- other consultancy costs
How do you determine what the extraterritorial costs are?
For the income tax return, you determine which part is taxable income and which part is extraterritorial costs as follows:
- Does your employee only have to file a tax return in the Netherlands? And are the costs for this higher than the costs for filing the return in the country of origin by a tax consultant? In that case, the extra costs are extraterritorial costs and specifically exempt. The remainder is taxed wages.
- Does your employee only have to file a tax return in the country of origin? In that case, the costs for this are deemed taxed wages. Are the costs for filing that return higher because the employee works in the Netherlands? In that case, the extra costs are extraterritorial costs and specifically exempt. The remainder is taxed wages.
- Does your employee have to file a tax return in the Netherlands and in the country of origin? In that case, the costs for the Dutch tax return are extraterritorial costs and specifically exempt. The costs for filing a tax return in the country of origin are taxed wages. Are the costs for filing the return in the country of origin higher because the employee works in the Netherlands? In that case, the extra costs are extraterritorial costs and specifically exempt. The remainder is taxed wages.
- Are you seconding a Dutch employee abroad and does he have to file a tax return in that country? In that case, the costs for the foreign tax return are extraterritorial costs and specifically exempt.