The Supreme Court has overturned the ruling of The Hague Court of Appeal and ruled that healthy lunches provided by an employer are indeed purposefully exempt from payroll tax.
We previously described the rulings of the District Court and the Court of Appeal of The Hague in our articles Healthy lunch taxed with payroll tax and Healthy lunch.
ARBO facility
The case concerns an employer offering its employees free healthy lunch meals in the company restaurant in the years 2017 and 2018. The lunches are coordinated with a dietician. They meet the guidelines of the Health Council and the five-slice pie chart from the Nutrition Centre (contain a set minimum amount of vegetables and no additives such as salt, sugar and e-numbers).
The employer has recorded the following in its risk inventory and evaluation under the ABRO legislation in relation to its Health and Vitality Policy: “... runs a healthy company restaurant. Healthy meals are offered in this restaurant to promote employees” health and vitality. This also reduces absenteeism. Demonstrable health measurements are done on employees and meals are prepared with great care in consultation with experts (e.g. Zorg van de zaak).". In addition, the employer has included a Healthy Eating Policy Statement in its Occupational Health and Safety Plan.
Targeted exempt
The employer argued that the free healthy lunches were exempt from payroll tax under the targeted exemption for health and safety provisions. The District Court and Court of Appeal ruled against the employer.
However, the Supreme Court considered that the provision of the lunches resulted directly from the employer's ABBO policy. The Supreme Court rejected the tax authorities' argument that specific rules apply to canteen meals and that it was therefore not the intention to include meals under the ABBO exemption. The argument that the provision involves a substantial private benefit for the employees is also rejected by the Supreme Court. The Supreme Court considered that it is common knowledge that healthy food reduces the risk of illness and can promote recovery after an illness. Providing healthy meals can therefore be part of the employer's policy to prevent absenteeism and therefore part of the employer's occupational health and safety policy.
Current ABRO exemption
The Supreme Court ruling was made for the years 2017 and 2018. With effect from 2022, the targeted exemption for ARBO provisions has been amended. It is now required that the provisions are directly related to obligations of the employer under or pursuant to the ARBO Act. Even under this stricter definition of the ARBO exemption, the lunches, as provided by this employer, appear to be targeted exempt. After all, the ARBO Act still covers policy health and vitality. But what is important here is the way in which the employer designed and substantiated the provision in the case presented to the Supreme Court.
The Supreme Court ruling can certainly also be an argument in discussions with the tax authorities about other types of occupational health and safety benefits.