The so-called ''Spring Agreement'' includes an additional package of reforms and increases in the tax and social security contributions which means that many companies will be confronted with wage costs increases in 2013 and beyond. Below we briefly set out what we believe to be the most important amendments with financial consequences in the field of statutory payroll tax.
Dismissal:
- Employers will pay the unemployment benefits for their employees for the first six months.
This means that on dismissal, the employer must continue to pay 75% of the employee's salary (capped to the daily wage: € 191,82) for two months and 70% for four months. Consequently, the employer will incur extra costs totalling approximately € 17,000 for each dismissed employee. As this amendment will only take effect in 2014, the unemployment benefit contribution to be paid by employers will be temporarily increased in 2013.
- Severance pay will be limited. The severance payment must also be used for training and retraining, and for 'work-to-work' initiatives. It is not yet clear exactly how the Legislator will implement this. In addition, the Stability Programme does not include a proposal for the long-desired reformation of the dismissal system itself.
- The employer's levy for excessive severance payment will be increased from 30% to 75%.
If an employee receives a payment totalling more than one year's annual salary and he/she earned more than € 531,000 (figures: 2012) for two years preceding dismissal, this is deemed an excessive severance payment. In such case, the employer must pay an extra final levy on the severance payment on top of the usual withholding taxes, i.e. double taxation. This levy must be paid by the employer.
Travel allowance:
- The tax-free allowance for commuter traffic will be abolished.
Employers may no longer reimburse their employees a tax-free allowance of a maximum of € 0,19 per kilometre for commuter traffic. In addition, the tax-free reimbursement of the actual travel costs incurred for public transport will be abolished.
- The tax-free reimbursement for business travel remains unchanged in 2013. This same applies to the reimbursement of public transport tickets. With effect from 2014 business travel costs will be taxed (see below).
Employers who wish, or must, continue to reimburse their employees for travel costs incurred subject to contractual or collective bargaining (CAO) agreements, may opt to continue paying their employees a net travel allowance and bear the tax burden themselves. Consequently, for reach kilometre reimbursed at € 0,19 at an average rate of 42% this means a wage cost of € 0,33 (€ 0,19 and € 0,14 (in taxes)).
Employers who have the contractual room to implement amendments may also choose to reimburse the gross sum of € 0,19. The employee will then, on application of an average tax rate of 42%, receive a net travel allowance of € 0,11.
For employers who apply the work-related expenses scheme, the allowance for commuting kilometres will no longer rank as a specific exemption with effect from 2013. Employers who have the contractual room to implement amendments may opt to continue paying the gross commuting allowance. This will be payable, other than is currently the case, out of the budget (or be grossed up). The percentage will be increased in 2013 from 1.4% to 1.6% (as compensation for a lower basis arising from the withdrawal of the reimbursement for the insured's own contribution under the Healthcare Insurance Act), and thus the spending budget will remain unchanged.
The business travel allowance will also no longer rank as a specific exemption with effect from 1 January 2014. Allowances by the employer for business travel will in such case be payable out of the budget (or be grossed up). For this purpose, the percentage will be increased in 2014 from 1.6% to 2.1%. Please note, allowances paid by the employer to the employee for, inter alia, business trips, for e.g. train tickets, remain tax-free. These allowances are valued at nil under the work-related scheme.
Company car:
- Private use of lease cars will be taxed, also if this use is less than 500 kilometres per year.
At present employees in possession of a statement 'no private use of company car', do not need to include the private use of a company car in their taxable income. With effect from 1 January 2013, all commuting kilometres travelled with a company car are also deemed to be 'private kilometres' and this means that the 500-kilometre limit will be quickly reached. A complication is that these employees are contractually bound by lease contracts whilst they chose to drive a lease car for which no addition (or very little) to their taxable income was necessary.
For this reason, the Cabinet has put the following rules into place for this group of employees (provided that the lease contract was entered into prior to 25 May 2012).
The relevant employees are not entirely spared but will have to pay 25% of the actual notional income, in other words, 25% of 25%, or 20% of 14%for very economical cars.
If the car is only used for commuter travel and the other private use is limited to no more than 500 km per year, a notional income of 25% of the actual notional income due (25% of 25%, or 20% of 14%). Please note, this transitional law applies for the duration of the lease contract but ends ultimately on 1 January 2017. For all new lease contracts or renewal of current contracts, the 'normal' notional income regime applies.
- There is no longer an addition for diesel-fuelled cars which emit less than 50 gram CO2/km.
The addition for tax purposes for diesel-fuelled cars which emit less than 50 gram CO2 per kilometre will be lowered to 0% with retroactive effect from 1 January 2012. Should you have low-emission diesel-fuelled cars in your vehicle fleet, you are entitled to file an adjustment up to 1 January 2012.
Extra tax on remuneration:
An extra tax, employers' levy, will be imposed on higher incomes (including bonuses) in 2012 ('once-off crisis levy'). This levy is 16% on wages insofar as these exceed € 150,000 in 2012. In addition, the employers' levy on severance payments exceeding € 531,000 will be increased from 30% to 75%.
Given these measures it could be quite worthwhile to reward employees with share-related benefits instead of bonuses (which bonus/benefit will not be taxed on issuance in 2013 but on exercise in a year that there is no crisis levy).
Work bonus:
The planned introduction of a new work bonus for older employees in 2013, in addition to the employed person's tax credit (arbeidskorting), will not be implemented. The work bonus was to replace the current deferred pension bonus. This deferred pension bonus will be abolished.
Furthermore, the work bonus incentive for employers to employ people older than 62 years of age will also be abolished.
Pension:
The retirement age in the Netherlands will be increased gradually. This will take place in stages and the first step will be taken in 2013 by raising the state pension age by one month in that year. In subsequent years the state pension age will be increased by two or three months each year up to a retirement age of 67 in 2024 after which it will be linked to life expectancy. The retirement age for additional pension will rise to 67 in 2014, and the maximum accrual rates will be lowered at the same time. This means that employers will have to contribute to their employees’ pension scheme for a longer period of time but that with effect from 2014 their contribution payment will be lower.
We can help you minimize the impact of the proposed amendments as much as possible.
Please contact Chris van Wijngaarden (+31 20 757 09 40 or chris.vanwijngaarden@vmwtaxand.nl) or Maarten Krikke (+31 20 757 09 02 or maarten.krikke@vmwtaxand.nl).
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