Netherlands: Budget changes for 2010, 2011 and 2012

Posted on 10th January, 2009

Estimated reading time 4 minutes

New expenses scheme (‘werkkostenregeling’) adds complexity and increases costs for employers

This year the budget proposals contain several far-reaching measures in the areas of wage tax and social security contributions.  A controversial new taxation regime, the “expenses scheme”, is outlined below:

Step 1: Assume all compensation and benefits are taxable

This includes any benefits provided which are necessary for carrying out the employment, commonly referred to as ‘business expenses’, for example, computer, travel expenses, professional literature, tools, etc.

Step 2: Certain defined benefits in the workplace will receive preferential valuation

For benefits that are used in the workplace (in part), valuation rules will apply. Currently, it is anticipated that the following benefits will either be free from tax or taxed at a favourable rate:

  • health and safety facilities at the work place, tax free;
  • food and drink consumed during work time, tax free;
  • uniforms, tax free;
  • company fitness (but only at the work place), tax free; and
  • canteen meals, favourably taxed.

Step 3: Final charge on the employer where compensations and benefits exceed 1.5% of the total salary amount,

An employer can designate which compensations and benefits will be used for the purposes of the ‘final charge’ (the employer is solely liable for the wage tax charge - no tax is due from the employee).  Insofar as the sum of these designated compensations and benefits exceeds 1.5% of the total annual salary amount paid by the employer, the employer must pay wage tax at a rate of 80% as a final charge.  This 80% tax charge cannot be recovered from the employee.

Certain compensations will not be taken into account for the 1.5% limit, which makes them effectively exempt from tax.  These include:

  • travel expenses;
  • hotel expenses (for example, during temporary residence);
  • study expenses, training courses etc.;
  • relocation expenses in the case of company relocation; and
  • the “30% tax ruling” will remain tax free.  (See Resource below for an explanation of the 30% ruling).

Excluded benefits

Some benefits are excluded from the final charge referred to above.  Tax on these benefits has to be paid by or withheld from the employee.  These benefits include:

  • the provision of a company car; and
  • accommodation provided by the company.

This new regime should take effect from 1 January 2011.


Even before discussions began in parliament, there has been substantial criticism of this proposed regime.  It would seem that the proposal falls short of its aim to simplify taxation and increases both the tax burden and wage expenses for employers.

It remains to be seen whether the proposal will survive parliamentary discussions in its current form.  If it does, it will effect a significant change in the remuneration system and employers should prepare in advance, taking into account financial aspects (the effect on employment expenses for the company), legal aspects (including considering current agreements on remuneration, any required changes/modifications, consultations with the works council, reviewing existing agreements with tax authorities) and carefully considering the tax consequences (which compensation and benefits exist, which ones will be designated, how will this be done etc.).

Employers are advised to consider what the consequences of the aforementioned measures may be, as soon as possible.  In our view, it cannot be ruled out that, as an employer, in due course, you will not end up paying more wage tax (as a final charge) than is paid currently.  The sums involved may be considerable.


In the Netherlands, if an employee meets a certain number of requirements, he has a right to a predetermined, fixed amount of reimbursement for extraterritorial expenses, amounting to 30% of his wages.  This is referred to as the "30%-reimbursement" or "30% tax ruling".

For further information, please contact Ton Mertens ( or Peter Bos ( on +31 20 578 57 85.

This article was produced by, and re-produced with kind permission of, our correspondent firm in The Netherlands, Loyens & Loeff N.V.

Loyens Leoff


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