Payroll & Expats: Year end tips and attention points
15 December 2016
With the end of the year rapidly approaching, now is a good time to verify whether any actions have to be taken immediately or can be postponed which can result in a benefit for you as an employer.
With this newsflash, we would like to update you on the most important tips, attention points and considerations to take into account by year end for payroll purposes. This selection can be both relevant for you as an employer and for your employees.
This newsflash is based on current legislation and case law.
Work related cost scheme
Optimize the work related cost schema
To fully benefit from the Dutch work related cost scheme, you should analyze whether the appointed employee benefits have been processed in the payroll in line with this scheme. Have you completely used the tax free budget (1,2% of the total taxable wage), is there still room (perhaps for the Christmas gift or other gifts for your employees), or do you actually need to pay 80% final levy on the excess part? You should also determine whether any payments processed in the financial administration should have been taxed through payroll according to the work related cost scheme, as they were not appointed as work costs. You cannot appoint any benefit after year end. This is also a good opportunity to verify the difference of the use of the tax free sum in comparison to last year.
Please notify your payroll provider whether you have appointed expenses under the work related cost scheme and whether this has already been included in the financial and/or payroll administration.
Many employers provide Christmas gifts or similar gifts to their employees at the end of the year. If appointed under the work related cost scheme, these gifts fall within the tax free sum. Otherwise, taxation should occur at the level of the employee (taxable in the payslip).
Please provide the payroll provider with the required information to correctly process these gifts in the December payroll.
If you provide Christmas gifts to your independent contractors or temporary workers, a final levy arises as these people are not your employees and hence, different wage tax rules apply. The final levy amounts to 45% if the gifts have a value not exceeding € 136 and 75% in other cases. The same taxation applies on gifts to external parties and for providing Christmas gifts to your former (now retired) employees.
Please notify your payroll provider on these gifts, if occurring.
Director – shareholder
A positive outcome of the introduction of the work related cost scheme exists for the ‘normal’ wage (‘gebruikelijk loon’) of the director-shareholder of his BV. The definition of taxable wage has been adjusted due to the work related cost scheme. Now, all expense reimbursements (taxable and exempt) of the director-shareholder are attributed to the wage definition. This means that for example a targeted exempted travel expense reimbursement increases your ‘normal’ wage. The Dutch tax authorities have confirmed this.
If the director-shareholder uses these reimbursements to increase the ‘normal’ wage, the wage in cash can be lowered with the same amount. Of course, the minimum ‘normal’ wage (€ 44.000 or 75% of the wage earned out of a most comparable employment or the wage of the employee with the highest salary) should still be met. It may therefore be worthwhile to verify the options to reduce the wage in cash.
30% ruling – salary norm
One of the conditions to be eligible for the 30% ruling is the salary criterion. This condition of € 36.889 for regular expats should be met on an annual basis. If a lower salary criterion applied given the age and education degree of the expat and the expat turned 30 in 2016, the salary criterion might not be met anymore. This should be carefully assessed, which can be done by us, as the 30% ruling does not apply anymore and should be processed as such in the payroll.
Check the sector classification and return to work contribution
The Dutch tax authorities send a letter with the sector classification to each employer based on the activities of the company as known by the Dutch tax authorities. This sector determines the amount of premiums an employer has to pay for unemployment benefits (higher premiums in sectors with higher unemployment figures). To avoid paying unnecessary high premiums, it should be assessed whether your company has been correctly categorized in its sector and that the premiums have been calculated correctly.
The same applies for the return to work decision (‘beschikking gedifferentieerde premie Werkhervattingskas’) from the Dutch tax authorities, which is determined by the disability benefit rate of an employer.
Please provide your payroll provider with these decisions, for proper review and handling.
Only tax the Dutch working days
If a tax treaty allocates taxation right of income concerning foreign working days to another country, this may already be taken into account in the payroll. This may be relevant in case you have cross-border workers and expats working for you. This limits your Dutch withholding obligation (wage tax and social security). This may also be of relevance for the tax free allowance available under the work related cost scheme.
A proper and complete workday-calendar providing an overview of foreign working days of the employee in such cases is essential. This can be provided by us.
Check the foreign social security contributions included in Dutch payroll
If a foreign employee remains subject to the social security of his home state, you should process the foreign social security contributions in the Dutch payroll in a proper manner. This may lead to deductible items in most situations and hence, higher net salaries for the employees and lower wage tax withholdings for the employer. In some situations, foreign social security premiums as paid by the employer are taxable from Dutch tax legislation perspective.
Therefore, please inform your payroll provider of any foreign social security premiums that are applicable.
Opt for the most beneficial R&D-deduction
Employers having an R&D decree, may choose whether to deduct the actual R&D costs or include a fixed amount per R&D hour. This choice applies for the entire year and should be made upfront. A careful assessment may thus be beneficial.
Register the regular lease car in 2017
The benefit in kind percentages (‘bijtellingspercentages’) change significantly in 2017. For standard lease cars in terms of CO2 emission, the percentage decreases from 25% to 22%. A 3% savings thus arises if the lease car is registered in the employee’s name in 2017 instead of 2016.
For completeness’ sake, the opposite applies for energy-efficient cars. These should be registered in the employee’s name in 2016 (if still possible) to benefit from a more favorable percentage (15% or 21% in 2016 vs. 22% in 2017). The 4% addition to income for zero-emission cars remains available in 2017 as well.
Income tax return assistance
Please be informed that if an employer reimburses or provides income tax return assistance for its employees, this assistance should be qualified as a benefit in kind. That benefit in kind has to be included in the payroll as a tax free benefit if appointed under the work related cost scheme or a taxable benefit for the employee (included in the payslip) otherwise.
Please inform your payroll provider on the income tax return assistance reimbursement in order to properly include that in the payroll.
Should you have further questions on the above or of you require further information or assistance please contact us via e-mail or call us at our office in Amsterdam at number +31 20 570 9440 or our office in Rotterdam at number + 31 10 201 0466.