• End of Year Message
  • January 7, 2011 | Authors: Mia van Dijk; Eugene Weultjes
  • Law Firm: Greenberg Traurig, LLP - Amsterdam Office
  • On December 22, 2010, the Upper House agreed to the 2011 Tax Plan. Following are the key changes to the wage tax act included in the 2011 Tax Plan.

    As of January 1, the work related cost scheme will be introduced. On the basis of this scheme, a maximum of 1.4% of total taxable wages may be paid as tax-free reimbursements and allowances to employees. Any amount paid above the 1.4% is subject to a final wage tax levy of 80%, payable by the employer.

    The work related cost scheme is not mandatory yet. Up to and including 2013, an annual election can be made between the work related cost scheme and the existing rules for tax free reimbursements and allowances. After 2013, the work related cost scheme applies for all employers. We will address a decree that elaborates on the work cost related scheme in more detail below.

    The cost of staff trips, staff festivities, etc., may be reimbursed tax free by the employer up to a maximum of € 454 per employee per year under the condition that such staff facilities have a binding force and the participation is open for at least three quarters of the employees.

    The payroll tax deduction for research and development activities (R&D) is extended on a one-off basis in 2010. This extension is now prolonged for one more year. This means that in 2011 the R&D-wage sum threshold amount is € 220,000 and the R&D withholding agent may apply the increased percentage of payroll tax deduction on the greater part of the R&D-wage sum.

    The penalty tax due by the employer when an arrangement for early retirement is offered to an employee will be increased from 26% to 52% starting in 2011. In this regard, the term “arrangement for early retirement” has a broad definition that includes early retirement arrangements and pre-pension arrangements, as well as many other arrangements. The employer must take the initiative in reporting and paying the penalty tax. The penalty tax cannot be claimed from the employee.