Employers nowadays offer their employees the opportunity to go to the cafeteria. Sometimes this is to have a meal. But in the context of payroll taxes, the term cafeteria scheme also used for the exchange of wage components. Another term for this is Individual choice budget (IKB).
Exchange gross for net
The crux of this tax trick, of course, is that you exchange gross pay items for net pay items. An employee who wants a bicycle will surrender a piece of his (or her) gross salary for 36 months. If the bicycle fits into the free space of the work-related costs scheme, this wage component is not subject to payroll taxes.
The employee then enjoys a tax-advantaged bicycle. The employer does not have to pay out the gross salary, but the employee only misses out on the net salary.
Such an exchange is allowed on condition that it is actually implemented. This means that, in principle, the reduction in gross pay must feed through to all schemes dependent on the employee's pay.
Service time exemption
An employee who has (at least) 25 years of service may receive a gross salary net once. The same applies to an employee who has been employed for (at least) 40 years. The gross salary is then exempt from payroll taxes: the service time exemption.
When an employee dies, a tax-free benefit of up to 3 times the gross salary (death benefit) may be paid to the heirs.
What matters for both regulations is what is included in gross pay. The implementing regulation provides that, in this context, the following do not belong to wages: tantièmes, accidental special remuneration and entitlements.
IKB
At court in The Hague, the case of an employer offering the opportunity to exchange 16.3% of the monthly salary. This consists of:
- 8% of wages: the holiday allowance;
- 6% of pay: the year-end bonus;
- 1.5% of salary: the life-course contribution;
- 0.8% of pay: part of the above-legal leave hours.
These components can be exchanged for:
- additional holiday hours;
- funding training;
- purchase of a bicycle or professional literature;
- reimbursement of commuting expenses;
- payment of union dues;
- corporate fitness;
- additional income (if a choice is not made in time, the budget will be paid in the form of gross wages).
The court ruled that the IKB does not belong to the gross salary that is the basis for the service time and death exemption. The former holiday allowance cannot be included in the gross salary that serves as the basis for determining the maximum of these exemptions. What is decisive is the monthly wage of the month prior to the month in which the service time or death benefit is granted; not the annual wage divided by 12.