From 1 January 2027, the rules governing the aggregation of wages and social security benefits for the purposes of payroll tax will change. This change will have financial implications for employees who receive social security benefits through their employer.
Amendment to the consolidation provision
The amendment means that, despite the combination of earnings from previous employment (social security benefits) and earnings from current employment, the employed person’s tax credit no longer applies to the benefit portion. This follows a ruling by the Supreme Court on unequal treatment. It concerns the following benefits in combination with earnings from work or a supplement to a benefit:
- WAO benefit
- WAZ benefit
- Wajong benefit
- IVA and WGA benefits (WIA benefits)
- Sickness benefit, unless it arises from the current employment contract
- Wamil benefit (Military Personnel Incapacity for Work Benefits Act)
- BNO benefit (exceptional natural circumstances)
- WTV benefit (reduced working hours)
- Allowance under the Allowances Act
Calculation example
An employee (aged 45) is in employment and receives a monthly WGA benefit of €2,000 via their employer (pay from previous employment). In addition, the employer pays €750 in residual pay and a supplement of €250 to the benefit, totalling €1,000 (pay from current employment). The total pay amounts to €3,000. Pay-as-you-earn tax relief is applied.
Implications for tax deduction
In 2026, the employer applies the ‘white’ monthly scale to the total amount of €3,000. The deduction amounts to €386.83, with €458.17 offset against this as an employment tax credit. The employee receives €2,613.17 net.
From 2027, the calculation will change. First, the deduction from the total amount of €3,000 is determined using the green monthly table (€845.00). Next, the employment tax credit offset against the salary from the current employment (€1,000) is determined using the white monthly table (€83.67). The final deduction is then €845.00 minus €83.67, which amounts to €761.33. The employee’s net pay is €2,238.67.
Financial impact
For the employee in the example, this means a net reduction of €374.50 per month. This amounts to approximately 18% of the benefit amount. This reduction can amount to a maximum of 31% of the gross benefit amount included in the total wages. Employers are advised to inform their employees of this change in good time so that they can prepare for it.