In our article It doesn’t take long to set up a staff canteen It states that, in cases where a meal costs less than the flat-rate value, you must still pay income tax on the flat-rate value. Recently, the North Netherlands District Court that this isn’t necessary. What’s going on?
Meals
This concerns meals that you, as an employer, provide to employees (remuneration in kind). If these meals are provided on a purely incidental basis, you must pay payroll tax on the value of the meal. A flat-rate valuation applies: in 2019, you must pay €3.35 in payroll tax per meal.
The main rule for valuing remuneration in kind is that the market value is used for this purpose. For the purposes of payroll tax, this is the value including VAT, even if you have deducted the VAT in full. The flat-rate valuation of meals at €3.35 is an exception to this general rule.
Cheaper
But what if your meal costs less than €3.35? That could be the case, for example, if you buy some bread, fillings and other items and let the staff prepare their own lunch. Court of Appeal of The Hague decided at the start of this year that, for the purposes of payroll tax, €3.35 per meal must be taken into account after all. A good two months later, the District Court of Northern Netherlands ruled that this component of pay may be valued at the lower actual costs.
The Court’s ruling concerns the wording of the Act as it stood up to and including 2011. This stipulates that rules may be laid down regarding the valuation of certain elements of remuneration. That rule states that the provision of a business meal, where such a meal is no more than incidental, is valued at €3.35. The fact that the actual cost of the meal is lower does not affect this.
With effect from 2012, this has changed and the rule now states that remuneration not received in cash may be set at a lower amount. The Court finds that this valuation rule applies only where it results in a lower value being determined; not where it would result in a higher value. If the employer can substantiate that the market value of the meal is less than €3.35, that lower value must be taken into account.
Since 2012, the main rule – which states that the value of remuneration in kind is set at its market value – has been supplemented by the provision that, where remuneration is purchased from third parties, the market value is deemed to be equal to the invoice value. In our example, therefore, this is the total value of the ingredients purchased for lunch (including VAT).