The work-related costs rules, to be introduced on January 1, 2011, will radically alter tax-exempt expenses and allowances. The goal is to lighten the administrative burden for employees. The Dutch Revenue has posted more information on its website regarding these rules. This information will soon be expanded even further.
The current tax-exempt expense and allowance system has 29 categories of expenses and allowances and is considered to be too elaborate. Based on the work-related costs rules, many of these existing provisions will be eliminated. These will be replaced by a fixed exemption of no more than 1.4% of the total salary for tax purposes (excluding elements of a final levy). Aside from this exemption, only a few exemptions of limited scope will be available with regard to business-related costs. The employer will pay a final levy of 80% on any amount exceeding the fixed exemption.
Transitional rules
Transitional rules will apply to ensure that the new regime for expenses and allowances is implemented smoothly. Based on the transitional rules, the employer may choose between applying the “old” or “new” regime each year, in 2011, 2012, and 2013. Opting for the “old” regime will mean that the 2010 rules remain in effect, except for certain costs such as those for staff parties. For those costs, the maximum exemption per employee is EUR 454 per year. If the employer does not opt for the “old” regime, then the new work-related costs rules apply.