In November 2022, the NOS reported that many of the Ukrainians who have fled to the Netherlands are in work. The Tax and Customs Administration takes the view that employers may not apply the specific exemption for extraterritorial costs (whether or not via the 30% scheme) to these employees.
The Tax and Customs Administration has announced this on the Tax Service Providers’ Forum. According to the Tax and Customs Administration, the exemption applies to people who come to the Netherlands to work. A refugee comes to the Netherlands for other reasons. We wonder whether the situation of an employee who has fled from Ukraine is not, after all, sufficiently comparable to that of an expat from another country, such that the Tax and Customs Administration’s position will be rejected by the tax court.
Extraterritorial costs
Extraterritorial expenses are the costs incurred by an employee as a result of working abroad. These costs may be provided to or reimbursed by the employer to the employee, exempt from payroll tax. In this regard, there is a choice between reimbursing or providing the actual costs (which the employee must, of course, properly substantiate) or the 30% scheme.
Examples of extraterritorial costs include (among others):
- cost-of-living allowance (additional living expenses due to the higher cost of living in the Netherlands);
- fees for (the renewal of) official documents (residence permits, driving licences, and the like);
- costs of medical examinations and vaccinations relating to the stay in the Netherlands;
- dual accommodation, as the employee continues to live in their country of origin;
- initial accommodation costs, in so far as these exceed 18% of the salary from the current employment;
- travel expenses to the country of origin (family visits, family reunification);
- additional costs for completing the Dutch income tax return (only the employee’s return, not their partner’s);
- course fees for learning Dutch (for the employee and their family members);
- costs associated with applying for the 30% scheme.
Extraterritorial costs do not include (among other things):
- temporary employment allowances, bonuses and similar payments;
- capital losses in the country of residence;
- costs associated with buying and selling a property;
- compensation for higher tax rates in the Netherlands (tax equalisation).
30% control
The advantage of the 30% scheme is that the employer and employee do not need to provide evidence of the actual extraterritorial costs. A maximum of 30% of the salary may be reimbursed to the incoming employee as a targeted exemption. For the conditions of the 30% scheme, please refer to our factsheet. PLEASE NOTE: In principle, an application for the 30% scheme must be submitted to the Tax and Customs Administration in advance.
The costs of an international school (or an international section of a mainstream school) for an expat’s children may be reimbursed to the employee by the employer, exempt from payroll tax, outside the scope of the 30% scheme.