Tax Allowances

Expenses and Allowances:

Employees who come to work in The Netherlands from another country are known as extra-territorial employees and can claim certain costs of their temporary stay in the country tax free.

Foreign employees may be eligible for a special expense allowance scheme known as “The 30 Percent Ruling” and be taxed only on 70 percent of their salary. The remaining 30 percent is treated as an allowance to cover all extra territorial costs and the employee does not have to produce any receipts or evidence that such costs have  incurred. To qualify for the scheme, the employees must:

• have been recruited to The Netherlands from overseas
• have the relevant level of earnings
• have a University degree or sufficient and demonstrable professional experience and
• apply within three months from starting their work
  

The 30 percent allowance is valid for a period of 10 years, but once it has been granted, only a few other expenses can be claimed. If the expected costs are higher than 30 percent or the employee does not qualify for The 30 Percent Ruling, the employer has the option to reimburse the real extra territorial costs incurred by the employee, as supported by evidence and receipts. Expenses that can be claimed totally or in part include:

• cost of living for the extra/higher costs in The Netherlands
• relocation expenses
• looking for accommodation
• costs of permits
• storage of furniture
• accomodation in The Netherlands if the employee is still paying for accommodation in the country of origin
• utilities
• travel between The Netherlands and the country of origin
• language courses
• telephone – calls abroad to country of origin
• food – up to a certain amount

In addition, an employer may reimburse actual expenses tax-free -separately from the 30 percent allowance, if they are incurred wholly in connection with the expatriate’s employment and would be incurred by Dutch employees under similar circumstances, for example:

• moving expenses at the beginning and end of the assignment period (12 percent of annual employment income up to a maximum of €5.445 plus transport costs)
• professional expenses incurred on business trips
• if a person is commuting daily by car and he does not fall under the 30% ruling, he can still claim 0.19 cents per kilometre as tax-free. Also, there is no limit for the number of kilometres covered
• a limited fixed allowance for commuting other than public transport
• the actual expenses incurred for public transport
• professional education expenses in connection with employment
• tuition fees and transport from attending an international primary or secondary school in the Netherlands (ie if based on a foreign school system or intended only for children from foreign employees)

For futher information please refer to the Dutch Ministry of Finance publication entitled Taxation in the Netherlands at http://www.minfin.nl/dsresource?objectid=50208&type=pdf