The scaling back of the ET (extraterritorial expenses) rule is part of the 2026 Tax Plan. On Tuesday, Dec. 16, this plan was adopted by the Senate.
The ET scheme is intended to assist employers in meeting the additional costs incurred by employees from abroad when working in the Netherlands, such as housing, travel and living expenses. By adjusting the scheme, the tax benefit for both employers and employees will decrease.
Consequences of adjusting the ET scheme
The austerity means that as of January 1, 2026, the additional living expenses (Cost of Living Allowance, COLA) can no longer be brought under the ET-rule and therefore can no longer be exchanged.
For employers, this change may result in higher payroll costs, while employees may be left with lower net income. Organizations using the ET plan are advised to assess the impact on employment conditions, contracts and their processing in payroll in a timely manner.
What can you continue to exchange?
Extra costs for housing
For the additional costs of housing, nothing changes from the current arrangement. These costs can continue to be exchanged within the ET expense plan after January 1, 2026.
Please note that costs for gas, water, light and other utilities do not fall under the additional costs for housing (see section 5.8 of the Explanatory Memorandum to the Tax Plan 2026).
Extra costs for travel between the Netherlands and the country of origin.
As of January 1, 2026, these travel costs can be permanently reimbursed at a flat rate of €0.23 per kilometer. This rate applies as the maximum untaxed reimbursement within the scheme.
What can no longer be exchanged?
Additional living expenses
These costs include:
- Gas, water, light and other utilities
- Extra call costs for private purposes with the country of origin
As of January 1, 2026, it is no longer possible to exchange these costs within both the ET expense plan and the cafeteria plan. This means that from now on these costs will be entirely the responsibility of the employee and can no longer be reimbursed on a tax-favorable basis.
Split housing costs and costs for gas, water, light and other utilities
Inspection practice shows that housing costs that are exchanged often include costs for gas, water, light and other utilities (g,w,l). In many cases, this total rent per period is fully exchanged through the ET scheme. As of Jan. 1, 2026, this is no longer allowed. It is therefore necessary to explicitly split the costs for g,w,l from the housing costs in order to remain in compliance with the tax regulations.
Note: In the SNA Interpretation Report 2023-014c, g,w,l is explicitly subsumed under the term "additional living expenses. The effect of this interpretation is that g,w,l is no longer eligible here.
Questions or need support?
Do you have questions or want to make sure your practice complies with the updated regulation? We're ready to help. Contact us and find out how we can support your organization.