If you come to the Netherlands to work, you will most likely incur extraterritorial expenses. Extraterritorial expenses are expenses that occur because you are living outside your home country (for example: double housing costs, home leave tickets, costs of requesting visa and permits and so on). Based on Dutch tax law as of 2001, employers can reimburse their employees for a number of actual extraterritorial costs, free of tax.
Furthermore, for a special defined group of expats, the 30%-ruling was introduced. It consists of a tax-free allowance of 30% of the expat’s taxable salary and has been created to cover extraterritorial expenses regardless of the actual costs incurred.
In this article, the authors go into the conditions for the application of the 30%-ruling.