If you are an expatriate or contractor working within Dutch borders then your employer can reimburse numerous Dutch expenses from your short-term stay in the Netherlands; tax-free under certain conditions.
These sets of Dutch expenses in the Netherlands are known as extra territorial costs. If applicable then the employee can also be granted the Dutch ’30% Ruling’ – should this be the case, the employee then won’t be required to prove that they made up the costs to the amount of the 30% allowance. Thereafter, it will be approved that the allowance is indeed covering the extra territorial costs.
What can happen, however is the employer can decide to reimburse the ‘real extra territorial costs’. This can take place if the costs incurred are higher than the Dutch 30% allowance, or if the 30% ruling isn’t granted to the employee in question. Alongside the allowance for extra territorial costs, the employer can still use the other possibilities in relation to normal labor costs.
If the Dutch 30% ruling is granted and therefore included in the payroll administration, then the ET costs can’t be paid back a second time separately; however, the normal labor costs can under certain conditions.
Dutch Expenses included in the 30% Ruling.
Dutch Expenses: House Hunting and Acquaintance Trips
Costs incurred for an acquaintance trip to the country of employment (as can often be with the family) can be claimed or compensated for tax free as per normal or extra territorial costs depending on situation.
Dutch Expenses: Home Leave and Family Reunions
Travel-expenses relating to home leave and family visits (such as an employee living within the Netherlands who can take his/her family on holiday to their original country of origin) qualify as Dutch expenses. Effectively, home leave and travel costs are both taxed as extra territorial costs.
Dutch Expenses: Language Courses
Costs of Dutch language courses for an expatriate or their immediate family members actually residing in the Netherlands qualify as Extra Territorial Dutch expenses. All necessary language courses can be reimbursed as extra territorial Dutch expenses/costs.
However, it should be possible to reimburse the costs of language courses to employees qualifying for the 30% Ruling free of tax. That is, as long as they can prove that they need to be able to speak the Dutch language in order to undertake their job.
Dutch Expenses: Telephone Costs
Private calls made by the contractor or expatriate to family members in their original country of origin qualify as ET Dutch expenses. Phone costs are tax free up to a certain level under the normal rules, part of which sees on the extra costs for calls to the home country that can be treated as extra territorial costs.
Dutch Expenses: Official Documents
Costs incurred in applying for or the legalization of official documents. Examples of such can be residence permits, visas and driving licenses alongside the costs of medical examinations and vaccinations, these all qualify as extra territorial Dutch expenses, provided that they are related to the assignment to the Netherlands.
Dutch Expenses that can be paid in addition to the 30% Ruling.
This allowance is effectively exempt from tax for employees, provided that the relocation is business related. This means that a tax-free allowance to cover relocation costs is allowed in addition to the 30% ruling. These costs include moving and storing furniture. Storage expenses are slightly more complicated. If furniture is to be moved to the Netherlands then the costs fall under normal rules for any labor costs; otherwise they are compensated as extra territorial costs.
Commuting to Work
Employees may be given a reimbursement (free of tax and premiums) of a certain amount per kilometer in relation to Dutch expenses. In principle, this is irrespective of mode of transport. This tax-exempt reimbursement may therefore also be given if employees travel via public transport. Alternatively, employees may receive a tax-exempt reimbursement for the costs of public transport that they actually incurred. However, tickets must be retained and then handed over to be kept with the payroll administration.
Should an expatriate live in the home country and commute to the Netherlands then these costs qualify as regular commuting costs and follow the standard rules as presented above.
Costs incurred for regular meals do not qualify as ET Dutch expenses. Meals of more than a marginal business nature can be reimbursed tax-free. The criterion of ‘more than a marginal business nature’ is therefore decisive. Meals with a business nature are, for example, due to working until evening or a lunch with a client or clients. In respect of foreign assignments, meal allowances can apply to meals enjoyed during a short stay in a hotel when an employee is not in a position to prepare a meal themselves.
International School Fees
The actual costs of attendance at an international primary or secondary school within the Netherlands, reimbursed or paid by the employer, are not taxable income for Dutch tax purposes. If the allowance or reimbursement is limited to tuition fees and transport, the same applies. This rule is not applicable to the cost of boarding schools; the payment or reimbursement of which will be considered taxable income.
General Business Dutch Expenses
Business travel, business telephone calls and equipment purchased required to perform and undertake a job can also be claimed for, as long as proof can be provided that without these aspects your business or job could not be performed or completed.
What does the 30% Ruling actually mean?
Basically, the 30% ruling allows the employer to reimburse Extra Territorial costs and Dutch expenses for the employee tax-free. In order to do this, the employee has to hand over all receipts for the employer to check and approve them. This can be a big task should numbers of employees find themselves in the same situation. To make the task easier, the employer and the employee can request that the tax office grant the 30% Ruling to the employee for his activities for the employer. By doing this, the employer can pay out a tax-free allowance of 30% (or roughly around that mark) of the salary for the employee.
The 30% Ruling and its allowance will be included in the salary, in a form where the Dutch expenses for the employer will not increase; while a higher net salary is given to the employee. The 30% allowance will not be paid on top of the arranged and agreed salary. If an agreement for net salary was reached then the benefit will be received by the employer.
What Euro Consulting BV can do is support you through your venture within Dutch borders in regards to Dutch laws and regulations. With all the time saved once we take on the contractor’s responsibilities, the contractor will have more free time through out Dutch BV. For more information on Working in Netherlands or our 30% Ruling page visit the Euro Accountancy & Finance Services website.