Netherlands: Work-related costs rules | KPMG | GLOBAL
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Netherlands: Work-related costs rules, standard practice criterion

Netherlands: Work-related costs rules

The district court of Noord-Holland issued a taxpayer-favorable decision with respect to the applicability of the work-related costs rules. The case is believed to be the first judgment addressing the work-related cost rules and the standard practice criterion.


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The case concerned an employer that had for several years offered a share plan to a number of directors, whereby they could buy shares in the company. If these employees were still employed after three years, they were awarded a number of shares for a nil (zero) consideration. The tax on these shares for a nil consideration was paid by the employer. 

As of 2012, the employer switched to the work-related costs rules. In 2012 and 2013, the employer had regarded the benefit arising from the shares awarded for a nil consideration as part of the final levy for the purposes of the work-related costs rules. In 2012 and 2013, various other salary benefits were also treated as part of the final levy, such as Christmas gifts and staff activities. To the extent that the fixed exemption in the work-related costs rules of 1.5% and 1.4% respectively was exceeded, the employer reported and remitted a final levy of 80% in 2012 and 2013.

The Dutch tax and customs authorities did not agree with this treatment and imposed supplementary assessments on a finding that the awarded shares could not pass the standard practice criterion of the work-related costs rules, in particular because of the amount of the provisions.

The district court concluded that the mere fact that the matter concerned provisions with a “substantial” value was not sufficient to conclude that the provisions could not fall under the work-related costs rules. The court concluded that what must be established is what is usual in similar circumstances, so that it can then be assessed whether this significantly (30) deviates from that. According to the court, the tax authorities failed to make clear which situation was being compared and that even if the efficiency threshold of €2,400 is generally accepted by employers, does not mean that the tax authorities provided the required evidence. 


Read a September 2016 report prepared by the KPMG member firm in the Netherlands

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