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Extraterritorial costs in the Netherlands - ET Kosten

author: Maciej Wawrzyniak20 April 2023
Extraterritorial costs in the Netherlands - ET Kosten

What is ET Kosten? Have you ever encountered this term?

These are the so-called extraterritorial costs in the Netherlands, which are provided for temporary workers. The tax credit is one way to reduce the cost of living in the country of tulips. Delve into the rest of the article, where we take a closer look at the most important ET Kosten information you should know about.

Extraterritorial costs Netherlands - what are they?

ET Kosten, or extraterritorial costs, is a form of tax relief in the Netherlands that was created to stimulate the Dutch labor market. This arrangement was created for temporary workers, i.e. people who work in the Netherlands, but permanently reside outside the Netherlands, such as in Poland, Romania, the Czech Republic, etc.

What do extraterritorial costs consist of?

The Netherlands makes it possible to receive tax-free reimbursement for expenses that are incurred by employees outside their country of origin, i.e. costs related to renting an apartment, for example.

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ET Kosten in practice, or how does it work in reality?

How does it work in practice? The Dutch tax administration assumes that temporary employees have to pay double costs for housing (in the Netherlands and in their home country). Therefore, such individuals can voluntarily forgo part of their taxable salary. In return, such workers receive tax-free reimbursement for having a so-called second home.

Extraterritorial costs Netherlands 2023 - what is subject to exchange?

Under the ET Kosten tax credit, you can exchange:

-part of a periodic salary (after exchange, its amount cannot be lower than the established minimum wage in the Netherlands; moreover, it cannot also exceed 30% of the actual salary amount),

-bonuses for overtime,

-public vacations,

-compensated hours allowances that result from non-normative working hours.

NOTE: taking advantage of the tax credit does not in any way affect the salary associated with overtime work and compensated hours. Moreover, wishing to exchange a portion of periodic pay along with vacation days, the exchange must not exceed 81% of extraterritorial costs.

ET Kosten in the Netherlands - when can you take advantage?

In order to qualify for extraterritorial cost relief, certain conditions must be met. First - the employee must pay double the accommodation costs we wrote about above.

However, this is not all. Those claiming ET Kosten must also pay for travel (e.g., from Poland to the Netherlands) and spend extra money on living expenses, i.e., amounts that the employee would not have spent had he not lived in the Netherlands.

What's more, extraterritorial expenses also include money spent on language courses.

ETK in the Netherlands - how to recover and what else do you need to remember?

Do you meet the above conditions? Then there is nothing stopping you from applying for reimbursement. How to do it? You need to draw up a declaration in writing and send it to the employer or agency where you are employed.

Many people wonder, also, who is not entitled to the Dutch ET Kosten tax credit. It's worth knowing that extraterritorial costs are not available to those who live permanently and are registered in the Netherlands.

What else is worth remembering?

When taking advantage of ET Kosten, you also need to know that the part of your salary that has been converted into reimbursement is the basis for calculating pension rights.

At the same time, this conversion is not the basis for calculating vacation days, vacation pay or public vacations, among others.

Extraterritorial costs in the Netherlands - summary

The Netherlands is a country that offers foreign workers not only a high salary, but also packages that reduce the cost of living in the country. A large proportion of foreigners going to the Netherlands plan first and foremost to save as much as possible. That's why ET Kosten is a tax break that is especially worth knowing about and remembering. Thanks to it we can get quite a substantial sum of money. The refund can range from €400 to as much as €750.

Wondering how much tax refund you will get from the Netherlands? Try out our Dutch tax refund calculator online 2023/2024 and find out what your return will be for the year. It is an extremely easy and intuitive tool to use – regardless of your salary and status, it ensures that every user will receive the most accurate overpayment calculation. Don't wait and make your tax affairs easier today!