Tax Treatment of Reimbursements Other Than the 30%-Ruling
Reimbursement of Expenses Separate from the 30%-Ruling
In case the tax authorities deny the 30%-ruling, it is still possible to reimburse expenses tax-free as long as they qualify as extraterritorial expenses. Please bear in mind that the expenses should be actually incurred by the expatriate and reimbursement should only be taken place after handing over receipts and invoices to the employer.
Foreign service premiums, cost of living allowances, tax and social security equalization payments and reimbursements for losses on the sale of assets due to the transfer cannot be reimbursed tax free in addition to the 30%-allowance.
In case expenses qualify as "extraterritorial expenses", they can be reimbursed tax free, but at the same time they lower the amount of the 30%-allowance with an equal amount. Relocation expenses are not regarded as extraterritorial expenses. This is in contrast to double housing costs, which are regarded as extraterritorial costs and therefore not tax allowable separately from the 30%-allowance. Double housing costs can occur in case the expatriate uses a temporary dwelling in the Netherlands and has their permanent dwelling outside the Netherlands. Other examples of extraterritorial costs are home leave, flights for visiting partner or family, storage furniture, language courses in Dutch and extra costs for housing (extra costs for a permanent dwelling in the Netherlands).
For practical reasons the State Secretary of Finance has approved that 18% of the income from current employment (excluding the rental income) should be considered as a normal expense for housing. In case the costs related to housing are more than 18%, the additional amount will be regarded as extra-territorial costs and the 30%-allowance should be lowered for the extra costs of housing. Housing costs for a permanent dwelling in the Netherlands under the 18% are taxable wage. Our advice to employers is to increase the level of income of the expatriate for the costs of housing so that the expatriate should pay for the rent from his net salary including the 30%-allowance paid on top of the higher gross income.
Reimbursement of other expenses
In addition, an employer may reimburse actual expenses tax-free separately from the 30%-allowance if they incur wholly in connection with the expatriate’s employment and should be incurred by Dutch employees under similar circumstances, for example:
- moving expenses at the beginning and end of the assignment period (€ 7.750 plus transport costs);
- professional expenses incurred on business trips;
- a limited fixed allowance for commuting other than public transport;
- the actual expenses incurred for public transport;
- professional education expenses in connection with employment.