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Maintenance calculation for expats, part 4Marjet Groenleer
The third blog on maintenance calculation for expats, listed the allowances expats usually receive. Against most allowances, there are costs that are associated with an expat existence. How are these taken into account?
Extra costs for expats
When they are recalled to their own country, in the case they are dismissed or become unfit for work, expats lose their expat status resulting in a significant reduction in income. Their pension is usually less than half the income they were used to and, in addition, is no longer exempt from local taxes. The necessity to save in order to cushion a large income reduction is therefore greater than average for expats. Also, expats incur extra costs to maintain their contacts with family and friends. Is this taken into account?
The influence of allowances on financial capacity
The allowances and the extra costs of expats are like communicating vessels. On the one hand, expats receive a higher income due to these allowances, but on the other hand, they also have more costs.
Case law shows a varied picture. The starting point appears to be that allowances for the stay abroad are always added to the income of the maintenance payer unless it relates to an allowance for hardship (hazard payment). On the costs side, the extra costs for expats are not always taken into account. It remains difficult to highlight these extra costs properly. Courts are not easily swayed to take these costs into account.
Allowances are primarily paid to expats working for international organisations such as ICC, Estec, OPCW etc. Maintenance payers working for international companies such as Shell are in addition often entitled to a bonus. The legal system also deals with this in a varied manner, although the trend still appears to be that the calculation is based on an average bonus of the last 3 years. It is the responsibility of the maintenance payer to show that it is not in the line of expectations that he/she will receive such bonuses in the future.
Indexation and exchange rates
If the maintenance payer expat lives abroad, his/her income must be converted from a foreign currency to the euro. In addition, it is often the case that the standard of living in the country where the foreign maintenance payer resides differs from the standard of living in the Netherlands. There are different ways of taking this into account. One way is to calculate with higher expenses than the expenses included in the ‘Maintenance standards’, the standards on the basis of which maintenance is usually determined. Another option is to adjust the income of the maintenance payer with an indexation figure. Different indexes are used for this purpose in practice.
To establish how much an expat is able to pay in maintenance is not always easy. Tailored work is required. If you have any questions, please do not hesitate to contact us.