Employees who are required to work abroad often incur additional costs. These so-called extraterritorial costs may be reimbursed to the employee by the employer on a targeted basis. This means that this reimbursement is not deducted from the ‘free space’ under the work-related expenses scheme.
Extraterritorial costs
Targeted reimbursement of extraterritorial costs may take two forms:
- on the basis of the flat-rate scheme;
- based on the actual additional costs.
30% control
The flat-rate scheme is also known as the 30% scheme. The maximum flat-rate allowance for extraterritorial expenses is 30% of the salary, including the allowance. With effect from 1 January 2027, the percentage under this scheme will be reduced to 27%. A number of strict conditions apply to the application of the 30% (27%) scheme.
Actual costs
A specific, tax-exempt allowance based on actual costs must be substantiated by the employer with evidence of the additional costs actually incurred by the employee(s) concerned. See our article Extraterritorial costs insufficiently substantiated.
With effect from 1 January 2026, the following extraterritorial costs may no longer be reimbursed on a targeted basis to new employees:
- cost of living (including the cost of gas, water, electricity and other utilities);
- call charges to the country of origin incurred by the employee for private purposes.
These costs can still be reimbursed tax-free within the discretionary allowance under the work-related expenses scheme.
Off abroad posted workers the additional costs of living and private calls may still be reimbursed under the specific exemption.