Taxable income in the Netherlands 

Everything that employees receive from their employer in the context of their (former) employment relationship or the employment relationship of another is taxable income for Dutch wage tax purposes. This not only applies to cash wages but also includes non-cash benefits. Dutch legislation also includes  wages in kind. This includes all reimbursements, provisions, and allocations that employees receive in the context of their employment relationship. For example, think of an expense reimbursement, providing a mobile phone or laptop, or giving a Christmas gift.

Who is liable for wage tax? 

In principle, the employee is liable for wage tax. The employee is the taxpayer, and the employer only withholds the tax on behalf of the employee. Naturally, it is considered unacceptable if an employee is taxed on, for example, a travel expense reimbursement or gift. Subject to certain conditions being met, the employer may, therefore, choose to bear the tax burden for reimbursements, provisions, and allocations at their own expense. This is called final taxation.

What is the work-related expenses scheme?

In short, the work-related expenses scheme provides every employer subject to withholding tax in the Netherlands with an amount to provide taxable reimbursements, provisions, and allocations tax-free to employees. This amount is called the free space, and the free space is recalculated annually. For example, in 2023, the free space was 3.0% of the first €400,000 of your taxable payroll and 1.18% of the surplus. For 2024, this is 1.92% of the first €400,000 of your taxable payroll and 1.18% of the surplus, etc.

What is the tax rate when applying the work-related expenses scheme? 

If the employer includes a reimbursement, provision, or allocation in the work-related expenses scheme, he initially counts these costs at invoice value including VAT against the free space. If the free space is exceeded, the employer pays 80% tax on the excess.

Not all reimbursements, provisions, and allocations fall under the free space. Not all costs for reimbursements, provisions, and allocations actually come at the expense of the free space. Some costs are specifically designated by the legislator as specific exemptions. This includes, for example, the travel expense reimbursement for business trips, costs for business trips, the 30% ruling, etc.

Also, for certain provisions, a lower valuation than the invoice value including VAT applies. For workplace facilities, such as coffee and refreshments, for example, a nil valuation applies.

Mandatory identification of wage under the work-related expenses scheme 

Every employer subject to withholding tax in the Netherlands is legally obliged to have an overview of the gross wage and the wage that he counts against the work-related expenses scheme. Employers are required to incorporate the work-related expenses scheme into their financial administration. ABAB International B.V. has developed useful tools for the implementation of the work-related expenses scheme for employers located abroad.

More information?

Do you wish to receive more information or guidance on work-related expenses scheme in an international context? Please contact Clea Cremers, global mobility specialist - tax, on telephone number +31(0)77-3217715 or send her an e-mail.