Work-related expenses scheme compulsory as of 2015

In a previous update we informed you about the taxation scheme for work-related expenses (‘werkkostenregeling’) which was introduced in 2011. The law allowed employers to choose between applying this new scheme or continuing to apply the former legislation if that was more beneficial or if they were not yet able to implement the new system.

On 3 July 2014 the Dutch State Secretary of Finance announced that as of 1 January 2015 the application of the new scheme will be compulsory for all employers.

Over the years, changes have been made to the initial regulations. The recently announced changes are as follows:

• the budget for work-related expenses will be reduced to 1.2% of the total wage costs
• Introduction of a 'necessity criterion' for a limited number of benefits such as tools, computers, tablets and mobiles; the benefit is tax free if the employer considers provision of the benefit is necessary for business use
• introduction of a group-based scheme: the designated benefits as well as the employment cost budget of all group companies can be combined (95% shareholding requirement)
• the tax due under the work-related expenses scheme (if the budget is exceeded) needs to be determined once a year only; any tax due may be paid in the first tax period of the subsequent calendar year
• benefits in relation to the work place – whether in kind or through cash reimbursement – will be treated in a similar way
• exemption for staff discounts on the purchase of products to be reintroduced from 2015
• the costs to be recorded under the work-related expenses scheme should include VAT; in order to reduce a further administrative burden the employer can agree with the tax inspector on an average VAT rate.

The exact details of the new proposals will be published in September when the government budget for 2015 will be presented.

Commentary

Employers who do not yet apply the work-related expenses scheme are advised to start their preparations for implementation of the new regulations now in order to be able to introduce the work-related expenses scheme with effect from 1 January 2015.

Resources

Letter of the Dutch Secretary of Finance dated 3 July 2014 (in Dutch language)

For further information or to discuss the consequences of the above, please contact Hans van Ruiten, on +31 224 6 418 or Rina Driece on +31 10 224 6 424 at Loyens & Loeff Rotterdam – www.loyensloeff.com.

Disclaimer

Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.

Circular 230 disclosure

To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Copying

If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.