Fiscal advantage following compensation of ET costs or application of the 30% rule

Will your employee be working in The Netherlands from abroad? Then this employee will sometimes create other costs in comparison to employees who find a job in their country of residence. In The Netherlands these costs are called 'extraterritorial' costs  (or ET costs). 


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Examples of ET costs are additional costs for the cost of living because of higher price levels in The Netherlands than in the country of origin. Also costs for double housing, storage costs for furnishings that are not moved to The Netherlands and travel costs to the country of origin for family visits are considered ET costs.

Compensation for ET costs is tax-free in The Netherlands

The employer is allowed to compensate ET costs tax-free in The Netherlands. Employees will of course have to demonstrate that they accrued these costs and the employer is required to retain this proof in their wage administration.

Advantage 30% arrangement

Instead of compensating the actual extraterritorial costs, the employer may compensate costs, under certain conditions, by providing 30% of the employee's wage (including ET compensation) tax-free. 

The application of the 30% arrangement is fiscally very favourable for both employer as well as employee. The employee receives 30% of their wage untaxed. The employer is not required to pay premiums for employee insurances on the wage.


The following conditions apply to the 30% arrangement:

  • The 30% arrangement can be only be applied to employees;
  • The employee has a specific expertise that cannot be found or can barely be found on the Dutch labour market. The employee earns a salary of at least € 37,000 (2017), exclusive of the free compensation;
  • The employer has a valid disposition in the wage administration to apply the 30% arrangement; and
  • The employee resided more than 150 kilometres as the crow flies from the Dutch border in the 24 months preceding the first workday in The Netherlands.

Take note: More flexible conditions for the 30% arrangement apply to certain groups, such as employees under the age of thirty with a masters degree.

If you are hiring a foreign employee, assess whether he or she is eligible for the ET cost compensation or the 30% arrangement.

Would you like to know more about the 30% arrangement? Please contact our specialist.

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