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If you have a business in the Netherlands and you employ staff, you pay them wages. Wages consist of everything you pay or give your employee as a consequence of their being hired by you. Besides money, it could also include free meals, a free mobile phone or payment of travel expenses. Under certain conditions these expenses are exempt from payroll tax. This is part of the new system for work-related costs that was introduced in 2015.
Some expenditures are tax free only when they meet 2 criteria:
- you must label the reimbursement or provision as ‘wages subject to deduction at source’ (called eindheffingsloon in Dutch)
- if reimbursements or allowances are capped, you may not exceed this amount.
'Eindheffingsloon' means that you, and not your employee, will pay tax over these costs to the Dutch Tax and Customs Administration. Examples of these costs are discounts on own produce, travel, meals, convention tickets, study and training fees, laptops, tablets, mobile phones and tools.
For tablets, mobile phones, laptops and tools to be exempt from payroll tax, they must be indispensable, which means:
- your employee cannot do a proper job without it
- you pay for it
- your employee does not pay any contribution for the item
- your employee returns the item if they no longer need it for their work or, if they decide to keep it, they pay the residual value.
Absolutely mandatory is that your employee has to use the item for their work. Whether or not they also benefit from it privately is not relevant. But if they prefer to choose a more expensive version of what is strictly necessary, you may ask for a contribution. You then deduct this from their net wages.
You may also choose to make use of standard reimbursements, but only after determining the real costs by keeping track of the various expenses of 1 or more employees. However, this is not mandatory for new standard reimbursements since the new work-related costs regime was introduced.
Travel expenses, including costs for commuting, are part of the dedicated exemptions from payroll tax. There are several possibilities: you may choose to give your employees paper tickets or travel passes, or to give them a contribution towards their private vehicle travel costs (with a maximum of €0.19 per kilometer).
Office and workshop equipment rated nil
Office and workshop equipment, such as desktop computers, landlines, xerox machines, tools and fitness equipment in the workplace, are exempt from payroll tax. They are not labelled as 'dedicated exemptions', but are rated as nil nonetheless. However, this only applies to wages in kind, not to payments in money.
Threshold or discretionary margin
If you pay for expenses that are not exempt from payroll tax, because they are not considered a dedicated exemption, are rated nil or exceed the cap, you can still apply the work related costs scheme. You can use 1.2% of the sum total of the fiscal wages of your company for tax free expenses. Only expenses that exceed this threshold are subject to payroll tax.
You do not pay payroll tax for expenses that fall within the threshold. You do have to record them as ‘wages subject to deduction at source’. If your annual expenses exceed the threshold, you pay 80% payroll tax over the excess. You check this once a year. If you have to pay payroll tax, because you have exceeded the threshold, please include it in your first periodical payroll tax return of the subsequent year.