January 22, 2018

Under Dutch tax law an employer who hires foreign employees could grant a tax-free compensation for the so called ‘extraterritorial costs’. The extraterritorial costs include, for example:

  • higher prices in the Netherlands;
  • travel expenses to The Netherlands to get to know The Netherlands;
  • travel expenses to the country of origin;
  • Dutch language courses for the employee and family members which stay with the employee;
  • telephone calls to the country of origin;
  • expenses for converting or applying for official documents;
  • double accommodation;
  • storage in the country of origin.

Alternatively, the employer could choose to pay 30% of the salary of the employee tax-free. A request to apply the 30% facility must be submitted by the employer and the employee to the Dutch tax authority. The conditions for a positive decision on applying the 30% facility are:

  • the existence of an employment relation;
  • that the employee has specific expertise that is not or barely available in The Netherlands;
  • that a positive decision was granted by the Dutch tax authority; and
  • that the employee, in the 24 month prior to the first working day, has lived more than sixteen months at least 150 kilometers in a straight line from the Dutch border (exceptions apply).

The coalition agreement of the new Dutch government formed in the last quarter of 2017, states that, as of 2019, the duration of the application of the 30% facility will be shortened from eight to five years. Therefore, if you consider to apply the 30% facility, we advise to submit an application in time so that you will receive a positive decision before the end of 2018.