Budget Day 2022: Payroll taxes

Increasing tax-free allowance work-costs scheme

Via the tax-free allowance under the work costs scheme (WKR), employers can give tax-free reimbursements, allowances and provisions to their employees insofar as no specific exemption is applicable. The tax-free allowance per employer amounts to 1.7% of the first € 400,000 of the taxable wage bill of all employees combined, plus 1.18% of the remainder of that wage bill. If the tax-free allowance is exceeded, the employer pays a final levy of 80%.

Due to sharp increases in inflation, the tax-free allowance is no longer always adequate to maintain customary allowances etc. without incurring final tax liability. This applies especially to employers in small and medium-sized businesses. The government therefore proposes to increase the tax-free allowance over the first € 400,000 of the wage bill for tax purposes by 0.22%. This means that the tax-free allowance for each employer will increase annually by € 880.

Increasing untaxed travel allowance

An employer can give an untaxed travel allowance for transport costs of up to € 0.19 per business kilometer, including commuting kilometers. The untaxed travel allowance is a targeted exemption in the payroll tax and does not come at the expense of the WKR's tax-free allowance.

Given the sharp increase in the cost of transport and the fact that the maximum untaxed travel allowance has not changed since 2006, it is proposed to increase the maximum untaxed travel allowance to € 0.21 per kilometer from 1 January 2023. From 1 January 2024, the maximum will then further increase to € 0.22 per kilometer

Note that barring any agreements in a mandatory collective agreement, employers are not obliged to provide a travel allowance. It is therefore also not mandatory to implement the increase from 1 January 2023. If this is desirable, however, it can be adjusted in the terms and conditions of employment.

Limitation on 30% rule for expatriates

For certain employees who come to the Netherlands from another country to work here, their employer may give untaxed reimbursement (targeted exemption) of certain additional costs due to temporary work and residence in the Netherlands. These additional costs can be reimbursed on a claim basis, but it is also possible, under certain conditions, to apply for the so-called 30% rule with the Tax Authorities. With application of the 30% rule, an employer can provide untaxed reimbursement of up to 30% of the 'wages' without further justification of the costs.

The salary over which the 30% rule can be applied is currently not capped. However, this will change with the proposed plans. The 30% rule will be limited to the remuneration standard for top officials in the Wet Normering Topinkomens (WNT norm). In 2022, this WNT norm will amount to €216,000 on an annual basis. This means that a maximum of € 64,800 (30% of € 216,000) can be compensated untaxed within the 30% rule. Should this not be sufficient in an individual case, it will still be possible to receive tax-free reimbursement of the extraterritorial made costs, instead of the 30% rule.

To avoid alternating between applying the 30% rule and reimbursing actual expenses, an explicit decision should be made between the two rules from 2023. The choice applies per calendar year.

The aim is for the capping measure to take effect from 1 January 2024. For employees for whom the 30% rule is applicable over the last pay period of 2022, the capping will take effect from 1 January 2026.

Expired customary pay scheme innovative start-ups

The taxable salary of director-major shareholders of innovative start-ups may be set at the statutory minimum wage for the application of the customary pay rule. The scheme may only be applied for a maximum of three years, after which the normal rules for determining the customary wage apply again. The aim of this scheme is to encourage innovative start-ups by improving their liquidity position.

Due to the limited use of the scheme, the effect on the liquidity position of innovative start-ups is small and the scheme is not effective. Therefore, it is proposed that the scheme be discontinued from 1 January 2023.

Customary pay scheme for significant shareholders

A taxpayer who carries out work for his private limited company in which he or his partner has a substantial interest must recognize a 'customary wage' for his work. To determine the customary salary, the salary of the most comparable employment should be used. An efficiency margin of 25% may be taken into account, bringing the customary pay to at least 75% of the pay for the most comparable employment.

It is proposed to repeal this margin, as a result of which the customary wage will generally be higher and more tax will be due in Box 1 of the Income Tax. In this way, the taxpayer's wage will more closely match that of an employee with a comparable job.

Want to know more?

Would you like to know more about the Tax Plan 2023, the proposed changes and what this means for you? Then please contact Alexander Rasink by e-mail or by phone: +31 (0)88 277 16 15. He will be happy to help you.