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Wage Tax Manual: most significant changes ET costs


Employees who are temporarily seconded to the Netherlands are often reimbursed for costs associated with their employment outside their country of origin (extraterritorial costs or 'ET costs'). A targeted exemption applies to these ET costs: the costs can be reimbursed tax-free based on the actual costs. However, when the 30% ruling is applied, a fixed tax-free allowance is applicable and the actual ET costs can no longer be (additionally) compensated tax-free.

A number of changes have been made in the Wage Tax Manual (‘handboek loonheffingen’) regarding the extraterritorial costs. Firstly, the costs for the 30% ruling and the costs for an A1-statement / Certificate of Coverage (“CoC”) application are defined as extraterritorial costs. Secondly, the exemption with regard to applying for or converting a work permit has been removed in the Wage Tax Manual. Thirdly, the costs of preparing the income tax return are no longer allowed to be capped at EUR 1,000. Finally, the Dutch Tax Authorities emphasise that the costs of tax advice for employees are considered to be wages.

Application costs for the 30%-ruling are ET costs

For incoming employees, most employers make use of the 30% ruling. In addition, most employers apply for an A1-statement or CoC on behalf of incoming / outbound employees. In the Wage Tax Manual, the Dutch Tax Authorities define the application for the 30%-ruling and the social security statement application as ET-costs. Consequently, the Dutch Tax Authorities take the position that the costs for these applications are seen as taxable wages for the employee for whom the 30%-ruling has been applied for and not as costs for the employer. 

Specific exemption work permit has been repealed 

Under the old ‘benefits in kind and reimbursements’ scheme, the application costs or costs for converting a work permit could be reimbursed tax-free as a business expense. The untaxed reimbursement of business expenses by the employer is possible under the ‘work-related costs’ scheme (WKR). Under this scheme, the application costs or costs for converting a work permit are not exempted as these are no longer defined as business expenses by the Dutch Tax Authorities. The exemption has therefore been removed from the Wage Tax Manual. 

This suggests that the costs should be defined as taxable wages of the employee. However, the costs for the work permit are often considered to be intermediary costs as the employer is required to obtain the permit. 

Costs of preparing an income tax return will be capped

When the employer pays for the costs with regard to the preparation and filing of the income tax return for an employee, the costs are deemed to be taxable wages. Are the costs for an incoming employee higher than when the employee was not deployed? Then these additional costs are considered to be ET costs. Up to December 2021 the Dutch Tax Authorities approve that a maximum amount of EUR 1,000 is assumed for these costs if no sufficiently specified invoice is available. As of 1 January 2022, however, the costs must always be based on the invoice value (including VAT)  and if necessary a specification must be requested. 

Costs of tax advice as taxable income 

The Wage Tax Manual notes that the costs of tax advice for an employee, paid by the employer, are considered to be employment income. In this context, it is important to assess the consultancy costs on a case-by-case basis. In general, the costs for tax advice related to the tax and social security obligations of the employer and groups of employees do not qualify as wages of the employee.

What does this mean for your company?

With the changes in the Wage Tax Manual 2021, the Dutch Tax Authorities have adopted new positions regarding certain ET costs. PwC does not always share the opinion of the Dutch Tax Authorities with regard to the positions that they have taken. In certain cases, it may be possible to take the position that no (taxable) wages are applicable for the employee. Therefore, it would be advisable to have a clear overview of the costs that are incurred for an employee and how these costs could potentially qualify, taking into account the position of the employee. Finally, we would recommend checking how the reimbursed ET costs (e.g. the costs for the application of the 30% ruling) have been processed in your payroll before the end of the calendar year.


Please feel free to reach out to your contact at PwC to determine the specific implications for your business. 

Contact us

Henk van Keersop

Henk van Keersop

Senior Manager, PwC Netherlands

Tel: +31 (0)62 285 13 14

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