How can you pay less taxes in the Netherlands?

ET scheme explained (ET-regeling)

As a foreign employee temporarily working in the Netherlands, you will most probably incur double costs with housing, extra cost of living allowance and double travel expenses.

To avoid this inconvenience, the Dutch tax office created the ET scheme, in agreement with local recruitment agencies.

ET stands for extraterritorial.

What is the ET scheme?

ET scheme is a tax arrangement that makes it possible to give employees who live abroad and temporarily work in the Netherlands a tax-free allowance for additional costs incurred on account of them temporarily working outside of their country of origin.

In other words, it’s a tax benefit allowing you to pay less taxes than you normally would.

The ET scheme can only be applied by recruitment agencies, not by “regular” employers.

How can I apply?

At Wanted we always look out for our workers’ best interest. The moment you sign an employment contract with us, we request your written permission for us to apply the ET scheme on your payslip. Basically, you just need to sign the authorization and we take care of the rest.

How much is the benefit?

At Wanted we provide accommodation in single rooms to all our employees. Although we bear the housing cost entirely, per law, this benefit must be considered in the payslip for tax purposes.

The same goes for travel expenses and cost of living allowances.

Under the ET scheme only 81% of these benefits will be considered for taxation.

The following benefits are eligible for exchange:

• Part of the time-based wage
• Days’ holiday over and above the statutory minimum
• Allowances for unsocial hours and overtime
• Time in lieu

The following extraterritorial costs qualify for exchange:

• Double accommodation costs
• Transport to and from the Netherlands
• Additional costs of living

Application of the ET regulation must meet the following conditions, among other things:

• This must be agreed in writing in advance
• The tax-free reimbursement is limited to actual costs
• The wage after the exchange may not be lower than the statutory minimum wage applicable to the agency worker
• The exchange may not exceed 30% of the effective wage
• The exchanged part does not affect the basis for overtime and unsocial hours allowances
• The maximum exchange wage and the days’ holiday over and above the statutory minimum are 81% of the ET costs. It does not apply to allowances and compensatory hours
• The amount of the tax-free reimbursement or the value of the provision must be stated on the payslip
• No reservations can be made on the exchanged part
• Pension accrual on the exchanged part does apply though

Source:
Article 20 of the CLA for Agency Workers

Eduard de Groot

Backoffice Support