A passage from the Payroll Tax Act, which most tax specialists can recite word for word, reads as follows: “Wages are defined as anything received in respect of current or former employment, …” (Article 10(1)).
Wages are simply
Everything an employee receives in the course of their employment constitutes pay. And that really does mean everything. It is irrelevant whether, as an employee, you actually derive any benefit from what you receive or save money as a result.
It doesn’t matter whether your employer pays it either. Anything you receive as an employee in connection with your work from anyone other than your employer is also taxed as third-party wages.
Of course, the salary you receive in euros forms part of your remuneration. And the benefit of the company car, which you are allowed to use for private purposes. But the benefit of the computer, the desk, the cup of coffee or tea at work, and so on, is also counted as part of your remuneration. Even the benefit you derive from using the toilet at work forms part of your remuneration.
The only items excluded from the definition of taxable remuneration are personal gestures that are not related to the employment relationship. These are items that the employer gives to the employee in situations where others would do the same. Examples include a bouquet of flowers on a special occasion, a fruit basket when an employee is ill, and a wreath.
But here too, the Tax and Customs Administration has seen fit to lay down rules. A personal gift with an invoice value (including VAT) of less than €25 is not considered to be part of your salary. Please note: if you have a bouquet of flowers delivered, the delivery charges must be paid out of that €25! If you exceed €25, you run the risk of the Tax and Customs Administration treating the gift as remuneration after all.
Is the soup really that hot?
Fortunately not! But this does require a whole range of laws and implementing regulations. These ensure that certain designated salary components are not taxed because they:
- are exempt;
- are valued at zero (or at a lump sum);
- are covered by the employer’s work-related expenses allowance (1.2% of the total wage bill).
Employers who are familiar with these rules can reward their employees in the most tax-efficient way possible. We are now in the final quarter of 2017. Employers who have organised their financial records accordingly can easily check how much of their work-related expenses allowance has been utilised. It would be a shame not to make full use of this allowance. However, exceeding it will cost the employee money in the form of payroll tax at the final levy rate of 80%.
You may be able to take advantage of other tax benefits, such as the labour cost benefits.
Would you like to know the best way to organise your financial administration? Or what options are available for offering tax-efficient remuneration to your employees? Please get in touch with your contact at VWG.
A prize can also be a reward
An employee discovered this and received a prize from his employer. At a time when his employer was struggling to recruit new staff, employees who referred a new colleague were given a bonus. A prize worth over €20,000 was raffled off amongst staff members who had referred at least three new colleagues. The employee in question won this prize and Amsterdam Court of Appeal has recently decided that this amount is to be included in the employee’s wages.
After all, wages are simply ….