What are extraterritorial expenses?
Are you employing any foreign employees? Extra expenses may often be reimbursed for such employees. These are extraterritorial expenses. In most cases these expenses are classed as wage. Have you reimbursed such expenses for your employees? We then request you to inform us as soon as possible. This will enable us to process the expenses before the year-end accounts.
Extraterritorial expenses include:
- Extra costs for living because of a higher price level in the country of employment than in the country of origin. They may include extra expenditure for meals, gas, water, electricity (cost of living allowance);
- Cost for an introductory visit to the country of employment, perhaps with the family, for example to go and look for a house or a school;
- Expenses for the application or conversion of official personal papers, such as residence permits, visas and driving licences.
- Costs for medical check-ups and vaccinations for the stay in the country of employment;
- Double accommodation costs, because the employee remains in the country of origin, for example hotel expenses;
- The (initial) accommodation costs. If you provide accommodation, only the (initial) accommodation costs exceeding 18% of the wages from current employment will be extraterritorial expenses. The rest are costs of wages. If the employee himself rents an accommodation, you may also apply the 18% calculation method to provide the exceeding amount tax-free. Generally you will not be able to reimburse or provide the accommodation costs for furniture tax-free;
- Costs for storage of the part of the household furniture that cannot be moved to the country of employment;
- Travel expenses to the country of origin. Think of a visit to family or of family reunification;
- Extra costs for having the income tax return filed if that is more expensive than having an income tax return filed by a similar tax adviser in the country of origin. A maximum of € 1,000 per employee applies hereto;
- Course costs to learn the language of the country of employment for the employee and the members of his family who are staying with him;
- Extra (non-business) telephone expenses for telephone calls to the country or origin;
- Costs of an application for social security exemption, such as an A1/E101 declaration.
The following costs are not extraterritorial expenses and therefore you may not reimburse or provide them tax-free:
- Assignment allowances, bonuses and comparable remunerations (foreign service premium, expat allowance, overseas allowance);
- Capital losses;
- Purchase and sale costs of a house (reimbursement expenses purchase house, brokers fee);
- Compensation for higher tax rates in the country of employment (tax equalization).
Other tax-free payments and benefits
Do you make use of the 30% ruling? You may then in addition also reimburse or provide the following expenses:
- Removal expenses, the costs for temporary storage and the transfer of the household furniture;
- Costs for an introductory visit by the employee to the company in the country of employment;
- Expenses for the application or conversion of a work permit for non-EU nationals;
- School fees for an international school or for an international department of an ordinary school. This will apply if:
- the programme is based on a foreign system;
- the school or the department is only accessible to children of expatriate staff.
Do you have any questions?
Do you have any questions about extraterritorial expenses? Please do not hesitate to contact us for advice at 020 820 15 60.