Evaluation of use of extra-territorial costs scheme

Further to the evaluation of the 30% facility, an addendum to the report "Kunde, Kosten en Keuzes" (Competences, costs and choices) has been published on the use of the tax-free allowance for extra-territorial costs actually incurred, a.k.a. the ETK scheme.

What is the ETK scheme?

The ETK scheme refers to the rule that an employer may provide all employees with tax-free reimbursement of actual extra-territorial expenses. Extra-territorial costs are the additional expenses incurred for temporary residence outside the country of origin in the context of the employment.

The "Addendum to the use of the ETK scheme" document recently published shows the use and non-use of the ETK scheme. This is an addendum to the Kunde, Kosten en Keuzes report on the evaluation of the 30% facility, the extra-territorial costs scheme and the partial foreign tax liability. The addendum does not alter the conclusions of the previously published report. For further details of this report please see our previous news item.

What can be derived from the addendum on the use of the ETK scheme?

Most employees on the ETK scheme have, on average, a weekly exchange budget of €50 - €200. The exchange budget is the maximum amount in expenses that an employee can exchange tax free. This is calculated on the basis of the difference between the statutory minimum wage relative to the gross salary, the number of days holiday in excess of the statutory requirement, allowances and overtime pay.

More than half the employees have more extra-territorial costs than exchange budget. The closer the salary is to minimum wage, the more often this is the case. For example, for employees earning close to the minimum wage, in 90% of cases the amount in ET costs exceeds the exchange budget.

It is also noteworthy that in 97% of cases, employees incur more in ET costs than they actually exchange. After exchange, the majority of employees therefore have both ET costs and exchange budget left over. This suggests that the exchange room, and thus the ETK scheme, is not being fully utilised. The data does not provide an explanation for this, however, and the reason for it therefore remains unclear.

Two thirds of the employees have a weekly benefit of between €0 and €30. However, the benefit can exceed €120 - the higher the hourly rate, the more benefit there is to be gained. The employer’s benefit in almost all cases lies between €0 and €20.