Anything you provide to employees as part of their employment is subject to payroll tax. This also applies to meals, such as lunch. But sometimes things aren’t quite as they seem.
More than incidental business
Fortunately, there are a number of exemptions under payroll tax. Where a meal is more than merely incidental to business, the provision of such a meal to employees is exempt. No payroll tax is then payable on its value, nor is the value deducted from the work-related expenses allowance.
A breakfast, lunch or dinner is more than just a incidental business expense, for example when this meal is combined with a business meeting or a business training course. Dining with a client or business contact is also generally exempt.
It is important, however, that you can substantiate the business nature of the meal. You must be able to demonstrate the nature and content of the meeting or course. And if you’re having a business lunch or dinner, you must be able to specify which business contact you’re meeting with. Make sure you’re not left tongue-tied if the tax authorities carry out an investigation!
Dinners that you reimburse or provide for your employees – who, due to work or overtime, are unable to eat at home between 17:00 and 20:00 – are also more than just a minor business expense. You can demonstrate this, for example, by providing work schedules.
Other meals
Only business meals provided as a secondary benefit – which you reimburse or provide to employees – are subject to payroll tax. If you reimburse the cost of the meal, you must pay tax on the amount of the reimbursement. If you provide the meal, you tax the amount you pay to purchase it (including VAT). If you prepare the meal yourself, you tax its market value (including VAT).
If you provide meals in a company canteen, a flat-rate valuation applies. You will then pay payroll tax on €3.35 per meal. This flat rate applies regardless of whether it is breakfast, lunch or dinner, and regardless of what the meal actually costs.
If employees pay a personal contribution, you deduct this from the (flat-rate) value of the meal. However, the remaining balance is never less than zero.
It is permitted to designate the meal – whether or not it is valued on a flat-rate basis – for the purposes of the work-related expenses allowance.
Staff canteen
The fact that the price of €3.35 per meal is not always good value is discussed in an case in which the Court of Appeal in The Hague recently ruled. The employer in this case provides bread rolls, fillings and other items. The employees use these to make their own lunch during their lunch break. They then eat it in a meeting room at the office.
The cost of these lunches is less than the flat-rate amount of €3.35. The employer therefore considers that payroll tax should be deducted on the lower amount. However, the Court ruled that the meeting room serves as a staff canteen, meaning that the flat rate must nevertheless be applied.
Coffee, soup and …
Coffee, tea, soup and similar items, when provided with a meal, are included in the flat-rate valuation.
Where coffee, tea, soup and the like are provided outside of a meal, but during working hours, such provision is specifically exempt. This also applies to a pastry or a piece of fruit. The time immediately preceding and following working hours also counts as working time. Consequently, a beer or a drink (on Friday afternoons) is also specifically exempt.