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Payroll tax in 2015Tax, social security law and employment notifications for national and international employers and employees

2 | Payroll tax in 2015

Payroll tax in 2015

3Payroll tax in 2015 |

Although the greatest care has been taken in the preparation of this brochure it is always possible that over the course of time certain information may become outdated or is no longer accurate. Our LLPs therefore cannot be held liable for the consequences of action or inaction on the basis of anything in this publication.

The information in this brochure is based on the current legislation in December 2014, including the relevant bills presented to Parliament on Budget Day 2014 and adopted by the Lower and Upper Houses. The subsequently published implementation rules may provide further details.

Payroll tax in 2015


Notification (1)There are a number of topics which require your particularattention. The first of which is, of course, the mandatory introduction from 1 January 2015 of the work-related costs scheme (WKR). Are you ready for it? Have your financial accounting and book-keeping systems been set up to deal with it? Some changes to the operation of the WKR 2015 have been made, the most important of which is the reduction in the ‘tax-free budget’ by 20% from 1.5% to 1.2% of the wage bill. To be ‘in control’ of the WKR, your HR, finance and control, tax and payroll accounting departments need to take a concerted approach so that it is possible to check the total amount in work-related costs against the tax-free budget on an ongoing basis throughout the year. You do not want to find yourself faced with having to make a remittance of 80% on the amount in excess of this budget at a later date. It is now time to get to grips with the work-related costs scheme!

Notification (2)Another important point to consider is the obligations which have to be met when making use of the services of self-employed contractors and freelancers. A bill has been submitted that will alter the current system of VAR statements (Statement of employment relationship, VAR). The indemnification which this statement currently provides in terms of the remittance requirements will be replaced by a temporary indemnification in advance but with the possibility that this could always be revoked at a later date. You could then find yourself faced with having to remit payroll tax with retroactive effect. When this legislation will come into force – the Exemption from Payroll Tax Withholding (Implementation) Act (BGL) – is not yet known. It would be advisable however to review

your current process of taking on VAR holders in view of the effect that this new legislation could have.

Notification (3)A third area to bear in mind concerns the changes to the tax legislation on pensions. Do your pension schemes – the basic scheme and any top-up schemes – meet the new provisions? The previously announced changes, including a cap on pensionable salary at €100,000, take effect from 1 January 2015.

Notification (4)For Directors/Major Shareholders (DGAs) the tightening up of the rules surrounding their ‘customary salary’ will be important too. Make sure that you can avoid discussions with the Tax and Customs Administration about this.

Section 7 of this brochure reports on a number of internationally-related matters while section 8 covers the latest developments in the field of immigration and section 9 provides details of the recent changes in labour law as well as the legislation on dismissal and the Unemployment Insurance Act (WW).

We hope that the information provided in this brochure will again be useful to you this year. In 2015 your Human Capital advisor will, as always, be on hand to support you in taking decisions and making choices concerning your employment conditions policy, and in implementing measures to ensure that you remain ‘in control’ of your payroll tax situation. Anticipating potential risks in time will help to avoid any unpleasant financial surprises later on.

This brochure provides an overview of the most important developments in the field of payroll tax and employment conditions for 2015 and 2016 as far as these were known in December 2014.

We have addressed here the various topics which you as finance director, HR director or executive, payroll administrator or financial controller may have to deal with. There is far more which we could say about each topic individually. For the sake of readability, however, in this brochure we have provided concise summaries. You are welcome to contact us if you would like further details.

The beginning of the end of the crisis appears to be in sight. As shown by the fact that the 16% crisis levy on high earnings that employers had to remit for employees on salaries of more than €150,000 in 2013 and 2014, will not be prolonged to 2015.The tax rate in the first band for people in employment will be raised by less in 2015 than was previously envisaged.

Introduction

5Payroll tax in 2015 | 5De loonheffingen in 2015 |


1. The main headlines 9

2. Getting to grips with the work-related costs scheme (WKR) 2015 10 2.1 The changes in 2015 2.2 Explained 1: tablets (the iPad), smartphones and satnav equipment 2.3 Explained 2: the WKR bicycle scheme 2.4 Explained 3: the staff party 2.5 Action plan, impact on financial accounting and employment conditions 2.6 The corporate WKR scheme 2015 2.7 Supplementary assessments for the work-related costs scheme 2.8 Work-related costs and VAT

3. Using self-employed freelancers and hiring other external labour 14 3.1 From VAR statement to BGL decision 3.2 Vicarious liability, G accounts and the deposit system 3.3 Labour Market Fraud (Bogus Schemes) bill (WAS)

4. Our ‘sacred cow’ 17 4.1 The Ministerial Letter on Vehicles 2.0 4.2 Policy in 2015 and 2016 4.3 Overview of nominal additions for company cars in 2014-2015-2016 4.4 Policy in 2017 4.5 Experience with the counter-evidence rule (on 500 km limit) 5. 5. Your pension 20 5.1 The changes in 2015 5.2 Ways to catch up and buy-in pension 5.3 Punitive levy on past service pension abolished 5.4 Further increase of state pension age (AOW)

6. 6. What every DGA should know 22 6.1 Customary salary 6.2 Insurance requirement for employee insurances

Contents

Payroll tax in 2015 | 7

7. 7. International affairs 24 7.1 Changes to the residency option for foreign taxpayers 7.2 Tax treaty between the Netherlands and Germany 7.3 Status of the proceedings on the 150 km criterion (30% facility) 7.4 Severance packages for cross-border employees

8. 8. What you need to know about immigration 26 8.1 The free exchange of services 8.2 Residence permits for start-ups 8.3 Residence permit for ‘job-seeking year’ extended 8.4 Single permit (GVVA) for work and residence 8.5 Salary standard for knowledge migrants 8.6 Recognized sponsors’ notification requirement 9. What you need to know about the new labour law, 28 dismissal legislation and the Unemployment Insurance Act (WW) 9.1 Changes from 1 January 2015 5 9.2 Changes from 1 July 2015 9.3 Changes from 1 January 2016 9.4 The Occupational Disability (Employment Targets and Quotas) Act

10. Other items 34 10.1 The life-course savings scheme and buy-out in 2015 10.2 Status of the proceedings on the 16% crisis levy 2013 and 2014 10.3 or employers in the public sector: the Senior Officials in the Public and Semi-Public Sector (Standards for Remuneration) Act (WNT) in 2015 10.4 Contribution savings on sector classification for corporate entities 10.5 Insurance contribution discounts for younger and older employees 10.6 Last but not least: towards a new tax system

11. Appendix: Figures for 2015 36

Contact persons Human Capital EY Tax Advisers LLP 46


1• The option element in the work-related

costs scheme has come to an end and from 1 January 2015 this scheme becomes mandatory for all employers (section 2).

• Directors/Major shareholders (DGAs) need to check the amount of their customary salary (section 6.1)

• The indemnifying effect of a statement of employment relationship (VAR Statement or Declaration of Employment Relationship) when contracting self-employed personnel is to be abolished (section 3.1).

• You will need to check whether your basic and top-up pension schemes still meet the new pension provisions in 2015 (section 5.1).

• Is your HR/P&O department aware of all the changes in labour law, dismissal legislation and the Unemployment Insurance Act (WW) (section 9)?

• If you have staff living abroad, their tax treatment in the Netherlands may be subject to change (section 7.1). You will need to take note of the developments in the 150 km criterion for the 30% facility if you engage staff from abroad (section 7.3).

The main headlines

We will begin with a brief summary of the main headlines in the field of

payroll tax and employment conditions in 2015. Elsewhere in this brochure you can read more

about these topics.

10 | De loonheffingen in 2015

Getting to grips with the work-related costs scheme 20152


2.1 The changes in 2015

Certain parts of the work-related costs scheme have changed from 1 January 2015:

• reduction of the tax-free budget by 20% from 1.5% to 1.2% of the taxable wage bill;

• three new specific exemptions for employment benefits and (monetary) allowances;

• different settlement method;

• introduction of a corporate scheme;

• different treatment of reimbursement of foreign fines.

Reduction of the tax-free budget by 20% from 1.5% to 1.2% of the taxable wage billThis reduction has been introduced to be able to make other changes to the work-related costs scheme while maintaining budget neutrality. The taxable wage bill is the sum on which you will remit Dutch wage tax in 2015. In some situations you will have to deduct certain amounts from this wage bill, including salary arising from past employment, such as pensions or severance payments and – for municipalities – social assistance benefits.

Three new specific exemptions for employment benefits and (monetary) allowances; a. necessary tools, computers, mobile communication devices and

similar equipment;b. certain facilities which are used or consumed in full or in part at

the workplace;c. personnel discounts on own (sector) products.

Further notes to a.This specific exemption applies only to allowances and employment benefits provided for tools, computers, mobile communication devices and similar equipment (e.g. iPads, printers, etc.). The new exemption is subject to FIVE conditions:1. these items are necessary to be able to properly fulfil the terms

of the employment contract;2. the employee must return these items – or pay the residual

value – if they are no longer necessary to be able to properly fulfil the terms of the employment contract;

3. the allowance or employment benefit may not be financed by the employee through the cafeteria model of employment conditions (exchange of employment benefits);

4. the allowance or employment benefit is not provided to a director or supervisory director of the employer. Only if the employer can demonstrate that the allowance or employment benefit granted for these (necessary) items is customary, will the same allowance/benefit for these two categories of employees be a specific exemption;

5. only one device of the same type may be provided, reimbursed or granted. One tablet and one Smartphone is permitted; two mobile phones are not.

Further notes to b.Up until 2014 a zero valuation applied to these workplace facilities if they were made available. Monetary allowances or provided facilities were taxable. From 2015 a specific exemption will now also apply to monetary allowances and benefits in kind. This relaxation of the rule applies only to:1. facilities directly arising from the working conditions policy pursued by the employer under the Working Conditions Act. An example being a medical examination conducted somewhere other than at the place of work.2. tools and equipment which may also be used elsewhere and which are entirely or almost entirely (at least 90%) intended for business purposes.

Further notes to c.The final widening of the specific exemptions is the re-introduction of the exemption which applied prior to the WKR scheme of personnel discounts for own (sector) products. Discounts of no more than 20% of the commercial value up to a maximum of €500 per employee per year will be deemed a specific exemption. There is one difference compared with the previous scheme. It will no longer be possible to carry over any discount which has not been used in a given calendar year to later years. Under the old regime a one-time tax-free discount of up to €1500 could be provided in a period of three years. Under the WKR regime this will no longer be possible. The maximum exemption is €500 per employee per calendar year.

Different settlement methodUp until 2014 you had to check all WKR expenses against your tax-free budget throughout the year. If the budget was exceeded this immediately led to a tax remittance of 80% on the surplus. This method lapses from 2015. Now you only have to settle your ‘WKR balance’ at the end of the calendar year. The 80% remittance on any excess must be paid together with the payroll tax return for the month of January 2016. It is important, of course, to carefully monitor your WKR spending throughout the course of 2015 to make sure that you do not find yourself faced with an unexpected tax demand.

Introduction of corporate schemeWe will discuss this separately in section 2.5.


2.2 Explained 1: tablets (the iPad), smartphones and satnav equipment

Under the WKR scheme these mobile communication devices may be provided (issued), reimbursed (monetary allowance) or granted as a facility (provided on loan). We set out the five conditions which must be met in section 2.1 (see the notes to a. above). There is one condition which we will further explain. The requirement that the employee returns the device – or pays the residual value – applies from the moment that the device or equipment is no longer necessary to be able to properly fulfil the terms of the employment contract. As a rule this will be when the contract ends but could also occur if someone changes job within the organisation.

We recommend that you make this obligation clear to your employees by stating it in any written employment conditions. This could also include rules for establishing the residual value if the employee may keep the device. For example, depreciation over a period of three years with a final residual value of 10%. Should the employee not be required to pay this when the employment contract ends, then it becomes taxable salary from that moment. It is also possible to designate this as a work-related cost charged to the 1.2% tax-free budget.

2.3 Explained 2: the WKR bicycle scheme

The specific tax exemption – under certain conditions – of €749 per employee per three years under the old regime has lapsed. Instead there is now the tax-free work-related costs budget which in principle is not subject to these conditions. The proviso is that it should be customary to provide or grant an allowance for a bicycle. This condition will almost always be met. It is therefore certainly not the case that “the bicycle scheme has been abolished”. In 2015 and thereafter you could still have a bicycle scheme as part of a cafeteria model of employee benefits. The employee gives up taxable salary in exchange for a tax-free work-related costs bicycle. There are no other conditions attached. The bicycle may cost more than €749 and the employee also does not have to use it for commuting. There is, of course, one ‘but’. And that is the ceiling of 1.2% on your tax-free work-related cost budget. If you wish to continue or introduce a bicycle scheme as part of your employment benefits package in 2015 and the years thereafter, we recommend that you budget for a fixed amount under the total tax-free WKR budget of 1.2%.

2.4 Explained 3: the staff party

Staff parties are considered to be taxable wage In case the party takes place at the place of work – place were the employer is responsible for employee-health – the taxable wage is being calculated as nihil. The cost of the party don’t have to be included in the 1.2% free budget. The value of staff parties outside the place of work are taxable wage. The invoice, VAT included, has to be included in the 1.2% free budget.

Group-activitiesIf employees from another company within the group are joining a staff party outside their regular place of work, no costs have to be included in the 1.2% free budget for the organizing employer. The costs are Work-related costs for the actual employer. The costs of the activity or party have to be divided between all group-entities. If the party is organised on the work place of the organizing employer, the Minister of Finance promised the costs of the party are also taxfree for all companies within the group. Please contact your Human Capital contact for the latest news regarding this item.

Business activitiesIf an employee activity is partly based on a social objective (charity), or is combined with pure business activities, (example: business courses who are closed with a party), it may be that the costs have to separated between work-related costs and specific exemption. Please contact your Human Capital contact for the latest news regarding this item.

2.5 Action plan, impact on financial accounting

and employment conditions

Employers who had not yet introduced the work-related costs scheme in 2014 are required to implement a process in their organisation by which they can show that they are ‘in control’ of the work-related costs scheme. This requires a multidisciplinary approach involving the payroll accounting, the financial accounting and the HR/P&O departments. Your WKR processes must be set up such that you can provide a reliable payroll tax return to the Tax and Customs Administration. On request, the specialists in the EY Human Capital practice group can help you in drawing up an action plan and with the actual implementation of the work-related costs scheme in your financial accounting systems.


EY has developed a calculation tool which will make it easier for you gain an overview of the main areas in your organisation affected by the work-related costs scheme. Based on the data you enter, this tool calculates for you the financial impact of the work-related costs scheme. It provides you with an initial impression. For larger organisations there is a smart QS (Quantitative Services) program available which can analyse large databases to assess the impact of introducing the work-related costs scheme. In relatively little time the QS software can provide a reliable picture of the extent of your organisation’s work-related costs.

You can obtain the calculation tool free of charge from your contact person at EY Belastingadviseurs LLP. The tool is regularly updated. The QS software, however, is not free, but if you wish to make use of it you can, of course, always ask your contact at EY Belastingadviseurs LLP in the same way.

2.6 The corporate WKR scheme 2015

Every employer should, in principle, draw up a WKR balance for each individual business or organisation. The new corporate scheme means that from 2015 employers forming part of a group or corporate entity may do that jointly. The advantage of this is that where one employer has exceeded the WKR budget this can be offset by another’s unused budget within the same group of affiliated companies. There are no drawbacks. If the group as a whole exceeds the total WKR budget, the corporate employer with the highest wage bill will have to remit the 80% final levy. All other employers within the group will be jointly responsible. CorporationA corporate group is said to exist if a single company holds an interest in the others of at least 95% (parent-subsidiary) throughout the calendar year. Similarly, if there is a third party which has a holding stake in the other companies of at least 95% (subsidiaries), then the WKR corporate scheme may be applied. Interest refers to legal and economic ownership (i.e. share ownership). The allocation of voting rights has no influence.

FoundationsUnder certain conditions foundations and charitable organisations operating as a group may also be able to apply the WKR corporate scheme. One of the conditions is that they are affiliated with one

another throughout the calendar year in such a way that they form a single entity financially, organisationally and economically.Implementation rules are to follow from the ministry.

2.7 Supplementary assessments for the WKR regime

If it turns out during a wage tax audit that certain allowances and employee benefits were incorrectly paid untaxed, the tax inspector can impose a supplementary assessment. Depending on the circumstances, the additional assessment may be immediately grossed up by the tax inspector. Grossed-up means a supplementary assessment rate of 72.4% in the 42% tax band (42 : 58 x 100%) or 108.3% in the highest tax band of 52% (52 : 48 x 100%).

And what about the WKR tax rate of 80% then? With a supplementary assessment at the grossed-up rate of 108.3% can you save yourself 28.3% by stating that you designated the (taxed) allowance or employee benefit in question as a work-related cost? Or indeed save yourself 108.3% because you still have sufficient WKR budget?

We believe so, provided that these relate to customary allowances and employment benefits. If allowances/employment benefits are taxed and the employer has not included them as part of the individual salary of the employee, the Tax and Customs Administration can (on the basis of a ministerial decision) assume that they have been designated as work-related costs. In this way you can gain a (tax rate) benefit if you suddenly find yourself faced with wage tax supplementary assessments arising from the work-related costs scheme. EY Human Capital, for that matter, specialises in providing support during wage tax audits by the Tax and Customs Administration and evaluating the avenues available for successfully challenging supplementary tax assessments.

2.8 Work-related costs and VAT

For wage tax purposes, all work-related costs have to be calculated including VAT. If you administrate your costs VAT excluded, you have to correct the cost with a VAT-increase of 0%, 6% or 21%. There is a possibility to make an agreement with the Tax Authorities about one average VAT-percentage.


3.1 From VAR statement to BGL decision

A bill has been submitted which may be very important if you make use of the services of third parties, such as freelancers or self-employed contractors (ZZP-ers). The proposed legislation introduces responsibility on the part of the hiring client. The aim of the new legislation is to combat bogus self-employment. In essence it is important to realize that you as the hiring party will have more responsibility. Should it turn out later that you failed to take your responsibility (or do so correctly), you can be held liable for any unremitted payroll tax.This new client responsibility has been created by abolishing the Statement of Employment Relationship (VAR) which provided indemnity and replacing it with an Exemption from Payroll Tax Withholding decision (BGL). The certainty provided in advance by a VAR has been removed. Under the new system your freelance contractor will provide you with a ‘BGL-statement’ (Exemption from Payroll Tax Withholding decision) containing a number of statements about how and under what conditions the work will be carried out. The circumstances and conditions will be determined by the answers that the freelance contractor gave in response to a list of questions in the application for a BGL decision. You, as the client, are not involved in the application for this decision. You are simply required to check the veracity of the statements in a decision that has been issued, insofar as the statements relate to your contract with the self-employed person and those you can influence. New is that the check is not only obliged at the start of the contract, but also during the contract. In this way you are held jointly responsible.

Examples of possible BGL statements include:

• your contractor/freelancer provides their own tools and equipment, resources and materials;

• the contractor can have the work performed by someone else without your consent;

• your contractor can decide on their own working hours and does not have to observe ‘block times’;

• if your contractor is sick, you do not continue paying anything, you do not reserve anything and you do not provide any supplement for days sick;

• if your contractor takes time off, you do not continue paying anything, you do not reserve anything and you do not provide any supplement for holiday;

• you enter into a direct agreement with your contractor or freelancer;

• your contractor has not performed similar work for you as an employee in the past 6 months;

• if the work fails to meet the terms of the agreement, your contractor has to amend or re-do the work at no extra charge;

• your contractor/freelancer is liable for any damage caused by them during the normal performance of the work.

Should it turn out at a later date that these statements are not consistent with the actual situation – and that the Tax and Customs Administration can therefore take the view that the relationship was actually one of employment – you can be held liable for all payroll tax which has not been remitted, despite the fact that a BGL was issued in advance. This takes retroactive effect from the date on which the employment relationship began (for up to five years). You have the right to prove that employment did not occur from the outset, but only arose later due to a change in the circumstances.

This BGL legislation is expected to enter into force during the course of 2015. Until the parliamentary processes surrounding the enactment of the Exemption from Payroll Tax Withholding (Implementation) bill have been completed, the State Secretary for Finance has decided that it will not be necessary to apply for any VAR statements for 2015. The VAR statements issued for 2014 will remain valid for a certain period in 2015. Parliamentary adoption of the bill will determine when this period will end.

Using self-employed freelancers and hiring other external labour3

What should you do?If your organisation makes use of the services of self-employed freelancers or other third parties, you will need to change your internal hiring procedures. There is a risk that at a later date you could be held liable by the Tax and Customs Administration for the payment of unremitted wage tax and social security contributions. The current indemnifying Statement of Employment Relationship (VAR) will become a provisional Exemption from Payroll Tax Withholding (BGL) decision.


3.2 Vicarious liability, G accounts and the deposit system

The best way to limit your vicarious liability (along the chain) is to deposit sufficient funds to a G account and to meet all the necessary administrative requirements. For some time now, there has been talk of replacing the G account system with a deposit system. You would then no longer deposit into a G account in the name of your intermediary or contractor, but make a deposit directly with the Tax and Customs Administration. It is still unclear whether – and if so, when – the deposit system will actually be introduced. The Tax and Customs Administration no longer speaks of the ‘deposit system’ but now calls it instead a ‘deposit service’.

3.3 Labour Market Fraud (Bogus Schemes) bill

(WAS)

A key area of the Cabinet’s policy is promoting fair competition between companies and ensuring that employees are paid a fair wage. The Cabinet intends to achieve this through various measures under the heading of ‘tackling labour market fraud and bogus schemes’. By the end of 2014 the Labour Market Fraud (Bonus Schemes) bill (WAS) has been submitted. Important subjects are:

• the rules concerning the issuing of clear payslips will be tightened up;

• expense allowances (which and how much?) must be stated on the payslip;

• the statutory minimum wage must be electronically paid into a bank account;

• it will be prohibited to withhold part of the nett minimum wage in settlement of certain amounts to be paid by the employee (at the moment: maximum 20% of the wage for accommodation and 10% for health insurance contributions);

• vicarious liability will be introduced for the payment of at least the statutory minimum wage and the collective labour agreement (CAO) wage.

The last of these points in particular will be important for clients. They will need to take steps to be able to check that their contractors are observing these payment obligations correctly.


4.1 The Ministerial Letter on Vehicles 2.0

The fuel-efficient car has become the victim of its own success in terms of tax benefits. All current tax facilities for cars with low CO2 emissions are having too great an impact on the National Treasury. In 2011 the then State Secretary for Finance published his Ministerial Letter on Vehicles 1.0 presenting plans on how mobility would be taxed in the period 2012-2015.

Letter on Vehicles 1.0The first Letter on Vehicles (Autobrief 1.0) included plans to scrap the road tax (MRB) exemption for most vehicles from 1 January 2014. It was also announced that the road tax exemption for highly fuel-efficient vehicles would be abolished from 1 January 2016. The Letter on Vehicles 1.0 further provided for a gradual reduction in the limits of the CO2 emissions such that - for tax purposes - a car is deemed to be less fuel-efficient, the period for a lower nominal addition was cut to the average length of lease contracts and the way in which the VAT correction for private use of a company car is calculated was also changed.

The Letter on Vehicles 1.0 created stability in the market for a long time. This was brought to an abrupt end by the agreements made in the Autumn Agreement (Herfstakkoord). An increase in the motor vehicle purchase tax (BPM) (on purchase) was announced from 2015 due to tightening up the CO2 limits, while no compensation in terms of abolishing the road tax exemption for highly fuel-efficient vehicles was offered in exchange.

Letter on Vehicles 2.0The State Secretary for Finance had been intending to present the new plans on vehicle tax 2016-2019 before the summer of 2014. This has been postponed now to the middle of this year. This decision was taken partly because there is insufficient political support at the moment to be able to get these amended vehicle tax measures passed in parliament, while a broad overall reform of the tax system is expected within the foreseeable future.

Naturally, there are various rumours circulating about the Letter on Vehicles 2.0. It is quite possible that in the Letter on Vehicles 2.0 the State Secretary will abandon all taxes on road users in one way or another for CO2 emissions and introduce a fixed nominal addition percentage of 22% for all cars. Another rumour is that the graduated scale for little private use will change.

Another new policy might be taxing business use drivers for their actual private use.

4.2 Policy in 2015 and 2016

Policy in 2015 Few changes will be made to the present legislation in 2015. The present CO2 limits will remain in force and the discount scheme for road tax (MRB) will remain as it stands. From 1 January 2015 only the distinction between petrol and diesel cars will be removed in the CO2 limits and tax rates.

Policy in 2016Given that the Letter on Vehicles 2.0 has been postponed, 2016 will be a ‘gap year’. At the request of the Lower House of Parliament, the State Secretary has already published the plans for 2016 as a transition year towards entirely new legislation on the subject of mobility. The CO2 standards will again be tightened up such that fewer and fewer vehicles will be eligible for a reduced nominal addition.

For example, the nominal addition for a petrol car with 85g CO2 emissions per kilometre was 14% in 2014, is 20% in 2015 and will be 21% from 2016. It is the case, however, that cars retain the nominal addition percentage which applied when they were first taken into use in 2014 or 2015 (or earlier), for up to 5 years (60 months). This means that if a lease contract for a petrol car with 85 g CO2 emissions per kilometre was entered into before 31 December 2014, the ‘old’ nominal addition percentage will be honoured for another 5 years (maximum). The lease car driver then still benefits from the favourable nominal addition percentage of 14% until the end of 2019. If a new lease contract is entered into in 2019 with a similar petrol car with 85g CO2 emissions per km, then it is quite possible that from then on a nominal addition category of 25% will apply for the same type of car.

The electric (hybrid) vehicles with a maximum of 50g CO2 emissions per km will continue to enjoy tax benefits in 2016. Although in many cases the nominal addition in 2016 will rise by a few percentage points.

Our ‘sacred cow’4

18

4.3 Overview of nominal additions for company cars in 2014-2015-2016

4.4 Policy in 2017

The Letter on Vehicles 2.0 has been postponed until mid-2016. This means that for the time being it remains unclear to consumers and the sector in general what changes in car taxes may be expected from 2017. Based on statements in the Energy Agreement of the Social and Economic Council (SER energieakkoord) it appears that ‘extremely fuel-efficient’ vehicles should, in any event, receive favourable tax treatment until the end of 2018.

4.5 Experience with the counter-evidence rule (500 km limit)

Anyone who holds a ‘statement of no private use’ (for a company car) or a ‘statement of business use only’ (for a company van) – or no such statement – who believes that no nominal addition for a company vehicle needs to be applied must be able to demonstrate that the number of kilometres driven for private purposes was not more than 500 kilometres in any calendar year. The case law in 2014 shows that this burden of proof is a heavy one and the courts have regularly ruled that the counter-evidence has not been provided. On top of which the Tax and Customs Administration has many automated avenues available to be able to check the accuracy of kilometre logs, such as road cameras with ANPR (automatic number plate recognition), parking data, road fines, and the NAP check (online km registration through garage data collection), etc. So be aware that the burden of proof is heavy, along with all these electronic verification methods.

| De loonheffingen in 2015

CO2 (gram/km)

2014 2015 2016

EV (electric vehicle)

• 4% nominal addition 0 0 0

• 7% nominal addition (semi-electric cars)

1 -50 1- 50 n.a.

Petrol/natural gas

• 7% nominal addition <51 <51

• 7% nominal addition 51 - 88 51 - 82

• 15% nominal addition 1 - 50



• 25% nominal addition > 117 > 110 > 106

Diesel

• 7% nominal addition < 51 < 51





• 25% nominal addition > 111 > 110 > 106


5.1 The changes in 2015

The tax facilitation of pension through the deductibility of the employee’s share of the pension contribution and exemption of the employer’s share, is essentially a form of delayed taxation. Only the pension paid out later is subject to tax. The government has limited this tax facility in several ways:

• all pension rights were already calculated on the basis of a start date at 67 years of age (which will be further raised in the future).

This is known as the standard retirement age or target retirement date.

• From 2015 two new measures will apply: • a further reduction in the accrual percentages per

pensionable year of service; • capping of the pensionable salary at €100,000.

An overview of the maximum accrual percentages:

(*) unless percentages are amended in the meantime

From 2015 the maximum pensionable salary of €100,000 must be adjusted accordingly for part-time working. The state pension offset, as it is known, also has to be deducted when calculating pension accrual..

5.2 Ways to catch up and buy-in pension

There are ways to cover pension shortfall or ‘gaps’. We speak of pension catch up when pension rights are optimised up to the tax-facilitated maximum under the existing pension scheme. This is determined by the number of years service with the same employer. Pension can be bought in to close any pension gaps arising from past employment elsewhere. Here the years of service with other employers are also included. Do seek professional advice if you are thinking of catching up or buying in pension.

5.3 Punitive levy on past service pension

abolished

Up until 2014 a punitive levy of 15% applied to high final salary schemes if the pensionable salary was raised. Further to the capping of the pensionable salary at €100,000, this punitive levy lapses from 1 January 2015.

5.4. Further increase in pensionable age

From 1 January 2015 the pensionable age (age at which the state AOW pension becomes claimable) becomes 65 years and three months. Under the present legislation this pensionable age will gradually be raised to 67 in 2023. In November 2014 a bill was submitted to speed up this process: raising it to 66 years of age in 2018 and 67 in 2021.

Your pension5

Retirement pension 2013 2014 2015 2016(*)

• Average salary scheme 2.25% 2.15% 1.875% 1.875%

• Final salary scheme 2.00% 1.90% 1.657% 1.675%

Standard retirement age 2013 2014 2015 201665 year 67 year 67 year 68 year

(expected)

What should you do?It goes without saying that both employers and employees need to make sure that their pension rights remain within the bounds of the new tax limits. Check your pension scheme(s) and amend them as necessary. For employees on a salary of more than €100,000 there is the question of how they can provide for their retirement using the surplus. There are certainly avenues available for this. One of the options is tax-free saving in box 3 by means of a nett pension or a nett annuity. A surviving dependents’ pension on the surplus is also well worth considering. Do seek expert advice.


2013 2014 2015 2016 2017 2018 2019 2020 2021

Present legislation +1 +2 +3 +5 +7 +9 +12 +15 +18

Proposed legislation +1 +2 +3 +6 +9 +12 +16 +20 +24

The table below provides an overview of the increases (in months) relative to the original state pension age of 65 years.

The link between pensionable age and life expectancy will also be brought forward to 2022 instead of 2024, as laid down in the present legislation. From 2023 there will be an annual review to see whether the trend in the average remaining life expectancy is such that the pensionable age should be raised by a further three

months. An increase in pensionable age is announced at least five years in advance. This means that this review of whether the pensionable age should change in 2022 will take place for the first time from 1 January 2017.

22

What all DGAs should know6

| De loonheffingen in 2015


6.1. Customary salary

Someone holding a substantial interest (a stake of at least 5%) who undertakes work for their firm, is deemed to be earning a certain minimum salary paid to them by their company. We are referring here to the director/major shareholder (DGA). If he or she draws too little salary, the difference is deemed to be notional salary and taxed as such. The rules have been tightened up from 2015.

Up until 2014 the customary salary was generally set at 70% at least of the salary earned by someone in employment doing similar work. It was necessary to find a ‘similar’ employed position. From 2015 this has been changed to 75% of the salary of the most comparable position in employment. This will be an employment contract:

• which does not involve a substantial interest;

• which is known to the employer and the Tax and Customs Administration;

• where the salary is known or may reasonably be estimated; and

• where the salary is also set in a customary manner.

The customary salary in 2015 will be set at the highest of the following amounts:

• 75% of the salary of the most similar role in employment;

• the salary of any other employee of the company or holding earning the most;

• a set standard of € €44,000.

A lower customary salary is permitted provided that the DGA can prove that the above rules would lead to a salary which is not customary in his or her situation. Examples of such situations include part-time working, a partial work disability or where the company is in an ongoing loss situation. Starters can also make agreements with the Tax and Customs Administration about setting a lower salary. A higher customary salary is also possible if the tax inspector can prove that the salary paid is less than is customary.

The importance of the customary salary rule is based on the total tax paid on the funds that a DGA withdraws from his or her company. On this salary s/he will pay up to 52%. The tax on dividend payments is 40.0% to 43.75% (depending on the profit made by the company). This difference of 8.25% to 12% relative to the 52% tax burden on a DGA’s salary provides sufficient reason to take a close look at the amount of the DGA’s salary.

We recommend that all DGAs check the salary paid to them in relation to the new rules on customary salary. If the salary paid in 2014 does not increase in 2015, the Tax and Customs Administration could consider this reason enough to check whether the rules on customary salary are being observed.

6.2. Insurance requirement for employee

insurances

Depending on the position of a substantial investor (e.g. are they also a director?) and whether there is an affiliation (e.g. are there multiple substantial investors working together in ‘their own’ companies) then in some cases they will be required to have employee insurances and in others not. This will be determined by the facts and circumstances. The ‘Regulations on the appointment of a Director/Major Shareholder (Regeling aanwijzing directeur-grootaandeelhouder) have changed. If a previous employment contract is converted to a management contract between the former employer and the company of the former employee, the insurance requirement for employee insurances should not be overlooked. Check your insurance position concerning employee insurances.


7.1 Changes to the residency option for foreign taxpayers

Under certain conditions, some foreign taxpayers – non-residents with a Dutch income – could choose whether or not to be treated as a Dutch resident for tax purposes. One of the main benefits of this was the mortgage interest deduction on an own home (owner-occupier property) abroad. This residency option has been abolished from 1 January 2015 and replaced by a stricter regime. The main rule now is that only foreign taxpayers who are resident in the EU, European Economic Area (EEA), Switzerland or the Dutch Caribbean Islands (BES islands) will be able to enjoy this benefit, provided that 90% or more of their income is subject to payroll or income tax in the Netherlands. If this income criterion is not met, then treatment as a resident taxpayer will only be possible for this group if the Netherlands is required to do so under either European law or a relevant tax treaty.

There are no transition arrangements. The taxpayers concerned would be wise to check in time how this change from 1 January 2015 will affect them. The amended rule could mean that the mortgage interest deduction on an own home abroad is halved or even lost completely.

7.2 The tax treaty between the Netherlands and Germany

Germany is the Netherlands’ biggest trade partner. Negotiations on a new tax treaty took several years to finalize. That process has now been completed (since 2012) but the treaty has still not been ratified by the Netherlands. It was initially expected that the new treaty would come into force from 1 January 2014, but even the date of 1 January 2015 is not achieved. The new rules of the treaty will apply as from 1 January 2016. Among other things, the new tax treaty changes the rules on tax liability (in the residence state, the work state or the source state) in relation to pensions and company directors. Ask for information on the latest situation if you have staff who work fully or partly in Germany, or if you have employees living in Germany who work in the Netherlands.

7.3 Status of the proceedings concerning the 150 km criterion (30% facility)

The 30% facility is a fixed tax-free allowance for extra-territorial expenses incurred by employees engaged from abroad. An employee will only be deemed as an incoming employee however, if prior to his or her employment in the Netherlands they lived outside a radius of 150 kilometres from the Dutch border. This legislation means that cross-border workers therefore cannot make use of the 30% facility. Court cases have been instituted to determine whether or not the 150km rule contravenes European law. The Dutch Supreme Court has in the meantime put questions on the matter to the European Court of Justice. Towards the end of 2014 the Advocate-General of the European Court of Justice (ECJ) concluded that the 150 km condition is not in all cases entirely consistent with the principle of the free movement of labour. We will have to await the ruling of the European Court of Justice.

7.4 Severance packages for cross-border workers

If an employee works in a cross-border situation and the employment contract is terminated with a severance package awarded, there there is the question of which country is entitled to levy tax on this. The residence state or the work state? Severance packages take many different forms. To create some sort of uniformity in the tax treatment of these, the explanatory notes to the OECD model treaty were revised and republished in 2014. Countries which have entered into tax treaties with one another have found this new commentary to be useful for the tax treatment of severance packages in cross-border employment situations. If your organisation finds itself in such a situation it is important to obtain expert advice.

International affairs7

25De loonheffingen in 2015 |


What you need to know about immigration8

If you employ staff in the Netherlands from outside the European Union there have been some important developments.

8.1. The free exchange of services

On 11 September 2014 the European Court of Justice (ECJ) issued a ruling concerning a fine imposed on the power company Essent. The case concerned a business based in Germany which had supplied Turkish nationals to work at a business based in the Netherlands while no work permits had been obtained in the Netherlands for these employees. The Social Affairs and Employment Inspectorate (SZW) had imposed a fine under the Foreign Nationals (Employment) Act (WAV). This was because the service provided had been limited to supplying labour which is not subject to the notification procedure. The ECJ ruled that a work permit for supplying labour constitutes a barrier to the free exchange of services within the European Union. In the Court’s view, a notification procedure should be sufficient.Further to this judgment the Minister of Social Affairs and Employment, Lodewijk Asscher, has confirmed that a work permit for supplying temporary staff from another EU member state will no longer be required provided that the following conditions are met:

• the work is of a temporary nature;

• the main activity of the service provider must take place in the member state in which it is based;

• the employee must be legally entitled to live and work in the state from which they are seconded;

• notification of the work must be provided in advance.

8.2 Residence permits for start-ups

Innovative start-ups and ambitious entrepreneurs are very important to the Netherlands’ economy because they help create new jobs and bring innovation and growth. One of the government measures to create an attractive environment for ambitious starters is the introduction of a start-up residence permit. Start-ups now often fail to meet the necessary conditions to obtain a residence permit as a self-employed person.

From 1 January 2015 innovative foreign starters from outside the EU can apply for a start-up permit. Under this scheme the starter

will be able to obtain a residence permit for one year. The business founder then has a year in which to actually set up the business, develop a business plan and raise the necessary finance. After that first year the starter can then apply for a residence permit as a self-employed person.

The following conditions must be met to be eligible for a start-up permit:

• the starter must have a reliable mentor with a strong record. This requirement is necessary to ensure that the starter has expertise that they can call on;

• the start-up must be able to show in what way the product or service is innovative;

• The Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland (RVO)) must provide the IND with a positive recommendation on the business;

• the business must be listed in the Commercial Register;

• the starter must have sufficient sustainable resources to be able support themselves.

8.3 Residence permit for ‘job-seeking year’ extended

Foreign nationals who have studied for a Bachelor or Master’s degree in the Netherlands can currently apply for a one-year ‘job-seeking’ residence permit. This job-seeking residence permit gives access to the Dutch labour market without a work permit within one year of graduation. In future, foreign nationals holding a PhD or who have undertaken academic research will also be eligible for a one year job-seeking residence permit. Soon it will be possible to apply for this job-seeking residence permit within three years of graduation or completing the research. The government hopes that this proposed change will help to retain more talented potential knowledge migrants. It has not yet been indicated when this widening of the permit’s validity will come into force.

8.4 Single Permit (GVVA) for work and residence

The single permit for work and residence (GVVA) was introduced on 1 April 2014 to implement European Directive 2011/98/EU.


Prior to this, the employer had to make separate applications for a residence permit and a work permit. The introduction of the GVVA has reduced this to just one application. The admittance criteria remain the same.This new permit is intended to reduce the administrative burden on employers. However there are a number of important points to be taken into account:

• the decision period for a GVVA application is three months;

• the employee may not work in the Netherlands until he or she has received the single permit (for work and residence) from the IND. This can take another two weeks after arrival in the Netherlands.

This last point in particular is very restrictive for Dutch companies. EY has written to the State Secretary for Security and Justice, Fred Teeven, about this. Although the Ministry of Social Affairs and Employment recognizes the problem, it appears that the European Directive offers no scope to be able to relax the policy.

8.5 Salary standard for knowledge migrants

Knowledge migrants (i.e. highly specialised or skilled personnel) are permitted to work in the Netherlands on the basis of their residence permit and do not need a work permit. Knowledge migrants are employees who are paid a certain minimum gross salary. The employer must also be registered with the Immigration and Naturalisation Service (IND) as a recognized sponsor.

The salary standards for 2015 are:

When salary for the knowledge migrants scheme is assessed onlythe financial element of the salary is taken into account. This is theagreed gross salary in monetary terms as stated in a signedcontract.

8.6 Recognized sponsors’ notification requirement

Employers who hire foreign nationals (‘aliens’) to come to the Netherlands to work are designated by the Immigration and Naturalisation Service (IND) as a recognized sponsor. All recognized sponsors have to meet certain obligations in terms of providing information, keeping and maintaining records. The notification requirement means that the recognized sponsor must inform the IND of any change which may affect the residency status of the foreign national within four weeks of the relevant change. This could include termination of the employment contract, starting to work part-time, changing employer, leaving the Netherlands or no longer wishing to come to the Netherlands. The IND can impose sanctions on the employer if this notification requirement is not observed.

PenaltyThe IND can choose to impose a penalty of 3,000 euro maximum for companies, entities and other organisations. The penalty for a natural person is 1,500 euro maximum. Furthermore, the IND has the possibility to withdraw the recognised sponsorship of the company.

Knowledge migrant

Work permit international transfer

Work permit trainee Work permit short stay knowledge migrant

Employee younger than 30

EUR 3.071 EUR 4.189 EUR 3.071 EUR 3.071

Employee 30 years and older

EUR 4.189 EUR 4.189 EUR 3.071 EUR 4.189

Graduates EUR 2.201 n/a n/a n/a

The salary requirement as of 1 January 2015 is communicated as a monthly gross salary (excluding 8% holiday allowance). The 8% holiday allowance is

a statutory requirement in the Netherlands. This means that the monthly gross salary must be increased by 8% if no separate holiday allowance is paid.

In 2014 the Upper and Lower Houses of Parliament adopted the Work and Security Act. There have been major changes in four areas:

1. Changes from 1 January 2015 2. Changes from 1 July 20153. Changes from 1 January 20164. The Occupational Disability (Employment Targets and Quotas) Act

9.1. Changes from 1 January 2015

A. Trial period A trial period in an employment contract for six months or less is invalid. This may not be deviated from in a collective labour agreement (CAO). For an employment contract longer than six months the present trial period rules will continue to apply:

The current legislation applies to employment contracts entered into before 1 January 2015. The new legislation applies to employment contracts entered into on or after 1 January 2015. If you wish to conclude an employment contract for a shorter period, agree on a period of six months and a few days (or an extra month). This then makes it possible to include a trial period of one month.

B. Non-competition clause A non-competition clause in an employment contract for a limited period (irrespective of its length) shall be null and void unless it

What you need to know about the new labour law, dismissal legislation and the Unemployment Insurance Act (WW)

9

Type of employment contract

Maximum length of trial period

Deviation in CAO permitted

Fixed term: longer than 6 months but shorter than 2 years

1 month Yes

Fixed term: two years or more

2 months No

Fixed term: end of the employment contract not set to a particular date (e.g. for the duration of a project)

1 month Yes

Indefinite period 2 months No



has been substantiated in writing that a non-competition clause is necessary for compelling commercial or job-related reasons. The substantiation requirement does not apply to employment contracts entered into before 1 January 2015.The substantiation requirement will apply to employment contracts extended on or after 1 January 2015. Employers therefore need to pay careful attention to fixed term employment contracts which were entered into before 1 January 2015 and renewed on or after 1 January 2015.

If there is a need to include a non-competition clause in an agreement it must be set out in terms which are both precise and persuasive. Avoid general wording, while the explanation for the clause must address the particular role of the employee concerned. Where there are no compelling commercial or job-related interests at stake, but you still wish to provide optimum protection for your business, you could include a wide-ranging confidentiality clause in the employment contract instead.

C. Notice requirement The Work and Security Act introduces a duty to provide notice for fixed term contracts of six months or more. The employer must give written notice no later than one month before the contract legally ends, informing the employee whether the employment contract will be prolonged or not, and if so, under what conditions. Please note that this notice requirement also applies when extending fixed term employment contracts.

The notice requirement does not apply:

• if the employment contract was for a period of less than six months;

• if the end of the fixed term employment contract has not been set to a specific date (e.g. for a project);

• to the employee.

SanctionsIf the employer neglects to give notice (in time), the employment contract still ends on the agreed final date but the employer is then required to pay compensation to the employee. If the employer fails to give notice the compensation is equal to a month’s salary. If the notice was not given in time, compensation must be paid on a pro rata basis (i.e. a week too late, a week’s wages as compensation).

Within two months of the date on which the employment contract was lawfully terminated, the employee must submit a claim to the subdistrict court for the failure to observe the notice period (in time).

The notice period applies to all employment contracts entered into on or after 1 January 2015. The notice requirement also applies to employment contracts entered into before 1 January 2015 and which end on or after 1 January 2015, unless these contracts end before 1 February 2015. Ideally, the HR administration system should generate an automatic signal about six weeks before an employment contract comes to an end, so that a timely decision can be made about whether the contract should be extended or not, so that this can be communicated in writing to the employee.

D. No work, no pay There are few avenues for suspending the obligation to continue to pay salary under a CAO. What this means specifically is that, in principle, the employer must continue to pay the salary if the employee has been unable to work for reasons which may reasonably be attributed to the employer. This can be deviated from (to the detriment of the employee): • by written agreement for the first six months of the employment contract; • after this initial period of six month only under a CAO, provided that the work associated with the job is of an occasional nature and does not have a fixed scope (e.g. for on call, standby, substitute and temporary staff).

The new legislation applies to employment contracts entered into on or after 1 January 2015. Existing deviations in CAOs will remain in force until the CAO expires but only until 1 July 2016 at the latest.

E. Temping Agency staff It may be stipulated in a temping agency employment contract that the contract may be ended at the request of the recipient to whom the temping agency employee was supplied. This is possible during the first 26 weeks that the agency personnel are employed. Under the present legislation the period of 26 weeks can be extended on an unlimited basis under a CAO. The Work and Security Act however has restricted this to a maximum period of 78 weeks.

The successive contracts rule (see section 9.2, under A.) only applies when an employee has worked for more than 26 weeks. Under a CAO the period of 26 weeks may be extended to a maximum of 78 weeks. The new legislation applies to employment contracts entered into on or after 1 January 2015. Existing deviations in collective labour agreements will remain in force until the CAO expires, but only until 1 July 2016 at the latest.


9.2 Changes from 1 July 2015

A. Successive contracts The successive contracts rule lays down that after a certain period of time successive fixed term employment contracts become an employment contract for an indefinite period. The intervening period between successive fixed term employment contracts may be no more than six months (previously this was three months).Three fixed term employment contracts may be concluded within a period of two years (was three years). The intervening periods of up to six months (previously three months) must be included in this period. An employment contract for an indefinite period arises by law:

• when a period of two years in which there has been two or more employment contracts is exceeded, or

• when a fourth fixed term employment contract is entered into.

The Work and Security Act places restrictions on the ability to deviate from the successive contracts rule in a CAO. Employment contracts entered into on or after 1 July 2015 will be subject to the new legislation. The new legislation will also apply to all contracts extended or renewed on or after 1 July 2015.

B. Lawful termination ‘Ragetlie-regel’ The present rule is that if an employment contract for an indefinite period that has been ended in another way than by a notice of termination or rescission by the court is followed by one or more fixed term employment contracts with intervening periods of no more than three months, then a prior notice of termination is necessary in order to terminate the last fixed term employment contract.

The Work and Security Act extends the intervals between the renewed employment contracts from three months to six.

This ‘lawful termination rule’ (Ragetlie-regel) also does not (or no longer) applies if the previous indefinite period employment contract ended due to reaching the statutory pensionable age. This termination however should be agreed upon in the employment contract (or the appropriate CAO). If the parties thereafter continue their association and enter into a fixed term employment contract, this then terminates by operation of law.

This amendment comes into force on 1 July 2015. It may be assumed that the same transition arrangements will apply as to the successive contracts rule, i.e. the new legislation will apply to all employment contracts entered into on or after 1 July 2015.

C. Dismissal: reasonable grounds Based on the Work and Security Act the employer can terminate the employment contract if there are reasonable grounds to do so and if redeployment in another suitable role within a reasonable period of time, with or without additional training, is neither possible nor reasonable. Redeployment or reassignment would not be reasonable or appropriate where there have been imputable acts or omissions on the part of the employee.

The reassignment requirement applies to both the termination of the employment contract as well as rescission by the courts. This means that the dismissal file must be complete and up-to-date also in this respect.

D. Two dismissal routes The two routes for dismissal – consent for termination from the UWV WERKbedrijf (the work placement branch of the Employee Insurance Agency) and rescission by the subdistrict court – are both still available under the new legislation. There is however only one route depending on the reason for the termination:

• for dismissal due to (a) commercial reasons, and (b) long term work disability, consent for termination must be applied from from the UWV WERKbedrijf (the work placement branch of the Employee Insurance Agency). After permission has been given the contract may be terminated further to observing the notice period;

• for dismissal related to personal reasons the subdistrict court is the only route to apply for termination of the contract. Personal reasons include: (c) regularly unable to work due to illness or disability, (d) unfitness for work or work disability (further to a return to work process), (e) imputable actions or omissions, (f) refusing to perform work due to a serious conscientious objection, (g) a damaged working relationship, (h) other circumstances of such a nature that it may not reasonably be expected that the working relationship can continue.

The reasons for dismissal are based on the present Policy Rules of the UWV WERKbedrijf (the work placement branch of the Employee Insurance Agency). The subdistrict court and the UWV WERKbedrijf will from now on apply the same rules.

Contrary to the present legislation, higher appeal and appeal in cassation (i.e. a legal review) are now possible for both dismissal routes.

When terminating the employer can deduct the time required for the UWV WERKbedrijf to handle the application from the notice


period to be observed such that a notice period of at least one month must remain. The handling time is calculated from the date on which the UWV WERKbedrijf received the completed dismissal application and runs until the signature date on the decision.

Under the new legislation the employment contract of employees who have reached state pension age or a contractually agreed higher or lower pensionable age may be terminated for this reason upon or after reaching that age without further assessment, unless it has been otherwise agreed in writing, either individually or collectively. One of the conditions is that the employment contract was entered into prior to reaching this age.

E. Transition allowance The subdistrict court formula will disappear as will the ‘clearly unreasonable dismissal’ lawsuits together with the damages awarded. Under the new legislation, the employee with a service record of at least two years with the employer will be entitled to a transition allowance if the employment contract:

• is terminated by the employer;

• is dissolved by the subdistrict court at the request of the employer;

• the fixed term employment contract is not extended by the employer; or

• further to serious imputable acts or omissions on the part of the employer:

• is terminated by the employee; • dissolved at the request of the employee; or • is lawfully terminated and at the request of the employee

is not immediately extended.

There is no entitlement to a transition allowance if the employment contract ends or is not renewed when the employee reaches state pension age or a higher or lower pensionable age as agreed. The same applies if the employment contract is not extended in connection with reaching that age.

The transition allowance amounts to one third of a month’s salary for every year of service in the first ten years and half a month’s salary per year of service thereafter. The transition allowance may not exceed €75,000 gross or one year’s salary if this is more than €75,000 gross.

There is no entitlement to a transition allowance in the event of ‘serious imputable acts or omissions’ (e.g. theft) on the part of the employee. In the event of ‘serious imputable acts or omissions’ on

the part of the employer (e.g. harassment to induce resignation) the subdistrict court can make a supplementary award.

For employees aged 50 and above at the time of dismissal, there are transition arrangements in place until 1 January 2020. A higher calculation standard applies to the transition allowance over the years that employees have been in service with an employer after their 50th birthday, provided that these employees worked for that employer for at least ten years: one month’s salary per year of service from the age of 50. This higher calculation rate does not apply to smaller employers: employers who employed fewer than 25 people in the second half of the calendar year prior to the calendar year in which the employment contract ended. The maximum transition allowance will be € 75,000 or the higher annual wage.

The statutory rule for the transition allowance may be deviated from in a collective labour agreement provided that it is a similar scheme of equal value.

The rule of the transition allowance is effective as from 1 July 2015 immediately. At this moment, there is no transitory law for employment contract, which have been concluded and will end on or after 1 July 2015. Consequence is that, if this employment contract ends after 1 July 2015, and the working period is longer than 2 years, the transition allowance is due. The transition allowance will be calculated based on the total duration of the employment contract. The period before 1 July 2015 is, in this example also relevant in the calculation.

Deductions may be made from the transition allowance for costs incurred by the employer – including when these were previously incurred during the period of employment – for training, outplacement or other costs to prevent unemployment. Most important condition is that the employee will agree with the mentioned deduction, before costs have been made. This agreement is not obliged if the settlement of costs for training, outplacement etc have been agreed upon by employers- and employee-organisations. We advise you to pay attention to this new transition allowance and the possibility of deductions.

F. Termination with the consent of the employee

F.1 Termination with the consent of the employee Under the new legislation the employer can terminate the employment contract without resorting to either the subdistrict court or the UWV WERKbedrijf (the work placement branch of the


Employee Insurance Agency). The employee must then state in writing that he or she gives their consent for the termination. This agreement does not lead to voluntary unemployment.

F.2 Termination by mutual agreement The parties can still end the employment contract by mutual agreement. However there are new rules which apply to this. For example, the termination must be contractually agreed in writing. F.3 Right of withdrawal and retraction The employee has a two week period in which he or she has the right to withdraw their consent or retract the termination agreement with no reasons given. The employee must send the employer a written statement to this effect. This period becomes three weeks if the employer fails to inform the employee in writing of his or her right to withdraw or retract within two days of giving their consent.

This right of withdrawal or retraction cannot be used if the employee has already made use of this right within the preceding period of six months.

G. Unemployment Insurance Act (WW): suitable employment After six months on unemployment benefit all employment will be deemed as suitable. This is currently one year.

H. Income adjustment Under the Unemployment Insurance Act (WW) the main rule is that when someone on unemployment benefit starts to work (possibly part-time) the number of hours worked will be deducted from the unemployment benefit. Entitlement to unemployment benefit continues to apply for the hours that an individual is still unemployed. The Work and Security Act introduces the principle of income adjustment. This is where some of the additional income from working is deducted from the unemployment benefit and some is not. This will make it always worthwhile to resume working.

What do employers need to take note of from 1 July 2015?

• The dismissal file must be complete and up-to-date, i.e. in order. Where an employee is unfit for work, for example, a return to work process must have been followed. A reassignment requirement forms part of this process. In almost all cases a suitable position must be sought. It is wise to start including all these aspects right from the start when building up a file.

• If it is possible and cheaper, wait before implementing a reorganisation or making an individual redundancy until the transition allowance takes effect.

• If it is necessary to agree on a social plan at this point in time and this provides for compensation (possibly based on the subdistrict court system), ensure that the terms of the plan do not extend beyond 1 July 2015.

• Fixed term employment contracts can be used with less flexibility. In this context it may be worthwhile to check whether

working with freelancers or flexible staffing through a payroller may offer a solution.

• For a series of fixed term employment contracts: conclude these for a period of less than two years, so that no transition allowance is required when they expire.

• Investigate the possibility of a company collective labour agreement (CAO). This is because it is possible to deviate more from the new dismissal law in a CAO.

9.3 Changes from 1 January 2016

The maximum duration for unemployment benefits will be cut from 38 months to 24 months (2 years).

The build up of unemployment benefit entitlement will depend on the employment history:

• one month unemployment benefit per year for the first 10 years of employment;

• for every further year of employment half a month of unemployment benefit entitlement will be built up.

9.4 The Occupational Disability (Employment Targets and Quotas) Act

This legislation is currently being debated in the Lower House and its aim is to increase the employment rate of people with an occupational disability. Binding agreements on this have been made with the social partners (i.e. trade unions and employers). It has been agreed that employers will provide jobs on an annual basis for people who due to a disability are not capable of finding work for themselves which pays the statutory minimum wage. Target figures have been mentioned of 100,000 jobs in 2025 in the private sector and 25,000 jobs in the public sector. Jobs filled by temping agency staff will also count. If the agreed results are not achieved then a quota system will take effect. This will be reviewed for the first time in 2016. If it appears that an insufficient number of extra jobs for people with an occupational disability have been created, then from 1 January 2017 a quota levy of €5,000 per unfilled job will follow. An exception applies for employers with fewer than 25 employees.

Payroll tax in 2015 | 33De loonheffingen in 2015 |


10.1 The life-course savings scheme and buying it out in 2015

The life-course savings scheme is on its way out and there are only a few ‘old cases’ still left. In 2015 these remaining employees can buy out their life-course savings balance all at once at a favourable tax rate. The balance on 31 December 2013 (including the yield up until the end of 2013) will be 20% tax exempt. The remaining 80% plus the yield since 2013 and any deposits made in 2014 and 2015 constitute taxable salary. Following buy-out the life-course savings scheme cannot be used again. So it really is on its last legs.

10.2 Status of the proceedings on the 16% crisis levy 2013 and 2014

There will be no crisis levy in 2015. Employers lodged objections and appeals on a massive scale against the previous 16% crisis levies on high earnings (more than €150,000) in 2013 and 2014. They were not opposed to the tax levy as such, but more its retroactive effect. The principle of protection of ownership provided for by the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) may well provide the key to success. In 2014 various District Courts ruled differently on whether the 16% crisis levy 2013 was in contravention of the ECHR or not. It is a matter of waiting for the ruling of the Supreme Court, final judgment rests with the European Court of Human Rights (ECtHR). 10.3 For public sector employers: the Senior

Officials in the Public and Semi-Public Sector (Standards for Remuneration) Act (WNT) in 2015

The Senior Officials in the Public and Semi-Public Sector (Standards for Remuneration) Act (WNT) sets a maximum for the remuneration of these officials. Until the end of 2014 this maximum – derived from the former prime minister’s salary and referred to as the ‘Balkenendenorm’– was based on 130% of a minister’s salary, but from 2015 this standard has again been cut to the same as that of a minister’s salary. Lower maximum standards apply in some sectors – such as housing associations. The transition arrangements for existing agreements are complex. But by 2022 no public official

anywhere may earn more than a minister. Unduly paid remuneration in excess of this standard must be paid back. The employers concerned are required to report any transgressions. It is important that this reporting requirement by which remuneration packages are assessed in light of the WNT standard for 2015 and the transition arrangements are carefully checked every year.

10.4 Contribution savings on sector classification for corporate entities

Every employer is by law allocated to a particular sector and must pay a sector contribution. In practice, however, it appears that the sector classification is an item that is often overlooked. And businesses may be missing out on contribution savings as a result. There are potential savings to be made, particularly in corporate situations where several employers in a group have been allocated to different sectors. It can do no harm to check the sector contribution (or have it checked).

10.5 Contribution discounts for younger and older employees

Young peopleIf you take on a young person (age 18 to 27) on unemployment benefit for at least 32 hours a week for at least six months then you are entitled to a contribution discount of €3500 per year. This discount will apply for up to two years. The discount scheme is temporary and will end on 31 December 2017.

Older peopleEmploying someone older (age 56 or above) on benefits is subsidised with a contribution discount of up to €7000 a year for up to three years. The employment contract must be for at least 36 hours a week. For part-time work the sum of €7000 is reduced on a pro rata basis. However new in 2015 is that the age threshold has been raised to 56 (was 50 in 2014). In existing situations the limit remains 50 years of age.

Administrative requirementsEmployers claiming this contribution discount must keep a ‘target group statement’ (doelgroepverklaring) with their payroll accounting. This is a statement issued by the Employee Insurance

Other items 10


Other items

Administration Agency (UWV) or by the Municipality which states that the individual concerned is entitled to unemployment benefit (WW) or was entitled to benefits under the Work and Social Assistance Act (WWB). In addition, a written employment contract must be held on file with the payroll accounting. From 2015, however, these written documents must be present before the contribution discount is applied. 10.6 Last but not least: towards a new tax system

The Lower House has expressed its desire to see a revision and simplification of the present tax system. One of the prime goals appears to be reducing the burden of taxation on the production factor of labour. It is envisaged that the Cabinet will set out the initial framework for a new tax system in 2015. We will, of course, keep you posted.


Figures for 2015

Summary

1. Payroll and income tax percentages

2. Contribution percentages, maximum wage subject to contributions and other employee insurances

3. Tax credits

4. Valuation criteria in the work-related costs scheme

5. Remittance contributions

6. Taxable benefit in kind company cars

7. Final levy and other special tax rates in payroll tax

8. Other figures


1. Payroll and income tax percentages 2015

The tables 1.1 and 1.2 are applicable to individuals who did not yet reach the age on which they are entitled to an Old Age Pension in 2015 (65 years + 3 months). The tables 1.3 and 1.4 are applicable to individuals who are entitled to an Old Age Pension (‘AOW’). For comparison we have also included the figures for 2014.

Table 1.1 Tax rates 2014 for people under the Old Age Pension entitlement age

Taxable income of more than

But less than Tax rate National insurance contributions rate

Total rate Tax levied on total amount of the tax bands

€ € % % % €

- 19,645 5.10 31.15 36.25 7,121

19,645 33,363 10.85 31.15 42.00 12,882

33,363 56,531 42.00 42.00 22,612

56,531 52.00 52.00

Table 1.2 Tax rates 2015 for people under the Old Age Pension entitlement age




€ € % % % €

- 19,822 8.35 28.15 36.50 7,235

19,822 33,589 13.85 28.15 42.00 13,016

33,589 57,585 42.00 42.00 23,094

57,585 52.00 52.00

Table1.3 Tax rates 2014 for people above the Old Age Pension entitlement age (born on or after 1 January 1946)*




€ € % % % €

- 19,645 5.10 13.25 18.35 3,604

19,645 33,363 10.85 13.25 24.10 6,910

33,363 56,531 42.00 42.00 16,640

56,531 52.00 52.00 *) For people born in or before 1945 a somewhat different second tax band applies. The percentages are not different from the above

mentioned rates.

Table 1.4 Tax rates 2015 for people above the Old Age Pension entitlement age (born on or after 1 January 1946)*

*) For people born in or before 1945 a somewhat different second tax band applies. The percentages are not different from the above mentioned rates.




€ € % % % €

- 19,822 8.35 10.25 18.60 3,686

19,822 33,589 13.85 10.25 24.10 7,004

33,589 57,585 42.00 42.00 17,082

57,585 52.00 52.00


2. Contribution percentages, maximum wage subject to contributions and other employee insurances

Table 2.1 Contribution percentages for employee insurances

Table 2.2 Healthcare insurance contributions Zvw

Contribution Maximum wage subject to contributions

Income-related contribution (employers’ mandatory contribution)

6.95% 51,976

Income-related contribution (without employers’ mandatory contribution)

4.85% 51,976

Flat rate contribution (average)€ 1,211 -

3. Tax credits 2015

There are seven different types of tax credits, four of which are included in the payroll tax tables:

• General tax credit

• Employed person’s tax credit

• Elderly person’s tax credit

• Single elderly person’s tax credit

There are three types of tax credits which you have to calculate and apply yourself:

• Young disabled person’s tax credit

• Life-course leave tax credit (no entitlement to the life-course leave tax credit can be built up after 31 December 2011)

• Work bonus (up and until 2013 applied in the income tax return and as from 2014 in payroll taxes)

Contribution Employer Employee Total Maximum wage subject to contributions per year

% % % €

State old-age pension (General Old Age Pension Act, AOW)

- 17.90 17.90 33,589

Surviving Dependents Act (ANW)- 0.60 0.60 33,589

Exceptional Medical Expenses Act (AWBZ)

- 9.65 9.65 33,589

Basic contribution (Occupational Disability Insurance Act)/WIA (Work and Income (Fitness for Work) Act)

5.25 - 5.25 51,976

Mandatory employers’ contribution for child care*

0.50 - 0.50 51,976

Differentiated contribution under WGA/ZW (so-called ‘premie Werkhervattingskas’)

Differentiated, please consult your ruling

- p.m. 51,976

Unemployment insurance contribution2.22 - 2.22 51,976

Sector fund contribution (average)2.68 - 2.68 51,976

Implementation Fund for Government Agencies (Ufo)

0.78 - 0.78 51,976


Table 3.1 Tax credits 2014

Tax credit Below the General Old Age Pension age (€) For people eligible for General Old Age Pension (€)

2015 2014 2015 2014

General tax credit (income-related)

• maximum 2,203 2,103 1,123 1,065

• minimum 1,342 1,366 685 693

Employed person’s tax credit (income-related)

• maximum 2,220 2,097 1,132 1,062

• minimum 184 367 94 186

Work bonus (income-related)

• maximum 1,119 1,119

• minimum 0 0

Elderly person’s tax credit (low incomes) 1,042 1,032

Elderly person’s tax credit (high incomes) 152 150

Single elderly person’s tax credit 433 429

Young disabled person’s tax credit 715 708

Temporary tax credit for those with early retirement and pre-pension entitlement, maximum

61 121

Life-course leave tax credit (per year of saving up until 2011)

207 205

Table 3.2 Overview limitation employed person’s tax credit 2014 - 2017

Income 2014 2015 2016 2017

was will be was will be was will be

20.000 2097 2220 2220 2477 2477 2586 2586

40.000 2097 2220 2220 2477 2477 2655 2655

60.000 1326 1472 1816 1764 2088 1984 2298

80.000 526 672 1016 964 1288 1184 1498

90.000 367 272 616 564 888 784 1098

100.000 367 184 216 164 488 384 698

110.000 367 184 184 0 88 0 298

120.000 367 184 184 0 0 0 0

4. Valuation criteria in the work-related costs scheme

As of 1 January 2015 the work-related costs scheme is mandatory. The following standard amounts are to be considered:

• specific exemption for commuter and business travel: maximum of € 0.19 per kilometer;

• meals on the workplace where there is no associated business interest: € 3.20 (2014: € 3.15) per free meal. No distinction is made regarding the type of meal (lunch or dinner, hot or cold). A zero valuation applies for refreshments provided at the workplace;


• certain forms of accommodation and lodgings: € 5.40 (2014: € 5.35) per day;

• allowance for refurnishments in the event of a business move: maximum € 7,750. In addition, there is a specific exemption for the actual cost of moving the inventory and equipment;

• volunteer scheme: maximum of € 150 per month and € 1,500 per year.

• Company products (staff discounts): 20% of the economic value maximized at € 500 per employee per year.

The benefit of interest-free or low interest personnel loans -other than those relating to the purchase of a primary residence or a bicycle - has been set at the commercial value, i.e. the difference between the interest paid compared with the market rate for the loan in question.

5. Remittance reductions 2015

Table 5.1 Remittance reduction for research and development work (R&D)

Table 5.2 Contribution reductions 2015 for elderly employees

For taking on benefit claimants aged 50 years or older, who work at least 36 hours per week, an annual contribution reduction in the WAO/WIA/WW/Awf/Ufo and sector fund of € 7,000. As from July 2015, this contribution reduction is only available if you have a ruling of the UWV (Dutch Social Security Authorities), stating that the employee received benefit prior to the period that he/she entered into your service.

Table 5.3 Contribution reductions 2015 for employees with a work disability

For employing people with certain work disabilities the employer receives a contribution reduction of € 7,000 per year for a working week of 36 hours per week. For young disabled persons (WAJONG: Occupational Disability Provision (Young Disabled Persons) Act) for whom dispensation has been given to pay a salary which is less than the statutory minimum wage, the reduction amounts to € 3,500 per year. The reductions apply on a pro rata basis for fewer working hours.

Amount Percentage

Remittance reduction for research and development work (R&D) amounts to

For R&D salaries (maximum) € 250,000 35%

For start-ups, up to a maximum of € 200,000 50%

Over the surplus of R&D salaries 14%

Maximum remittance reduction € 14,000,000


6. Taxable benefit in kind company cars

Table 6.1 Percentages taxable benefit in kind

The amount of the taxable benefit in kind of a company car depends on the CO2-emission (in g/km) and the date on which the vehicle was fist registered. As from 2015, the different CO2-limits for diesel and other fuels no longer apply.

*) For cars for which the license plate is granted before 1 January 2014, the CO2-limits depend on the date on which that occured.

Tax rate License plate granted before

1 January 2015

License plate granted as from

1 January 2015

Diesel

• at least 14% > 50 - ≤ 85 gram> 85 - ≤ 111 gram

> 111 gram• at least 20% Not applicable

• at least 25%

Electric/hybrid cars without range extender

• at least 4% (for 5 years after obtaining license plate) 0 gram 0 gram

• 0% until 1 January 2017, if license plate is obtained before 1 January 2012 Not applicable Not applicable

• 0%, for 5 years provided that license plate is obtained between 1 January 2012 and 1 January 2014

Not applicable Not applicable

Electric/hybrid cars with range extender

• at least 7% (for 5 years after obtaining license plate) ≤ 50 gram ≤ 50 gram

All other fuels

• at least 14% > 50 - ≤ 88 gram> 88 - ≤ 117 gram

> 110 gram

> 50 - ≤ 88 gram

• at least 20% > 88 - ≤ 117 gram

• at least 25% > 110 gram

7. Final levy and other special tax rates in payroll tax

Table 7.1 Final levy rates

Table 7.2 Pseudo-final levy rates


Pseudo-final levy rates (%) 2015 2014

% %

Early retirement schemes (RVU) 52% 52%

Excessive severance packages 75% 75%

Past service in excessive final salary pension scheme Expired 15%

Crisislevy high earnings (> € 150,000) Expired 16%

Final levy rates (%) 2015 2015 2014 2014

Grossed up Standard Grossed up Standard

% %

Contractors, homeworkers, sex workers and similar occupations

• with tax credit 14.90 13.00 16.20 14.00

• without tax credit 56.20 36.00 56.20 36.00

Anonymous workers 108.30 52.00 108.30 52.00

Non-anonymous employees, under the age of 65 years + 2 months, depending on annual salary

57.40 36.5056.80

72.40, or108.30

36.2542.00, or

52.00

Non-anonymous employees, over the age of 65 years + 2 months (2013: 65 years + 1 month), depending on annual salary

22.8031.70

72.40, or108.30

18.6024.10

42.00, or52.00

22.4031.70

72.40, or108.30

18,3524,10

42.00, or52.00

Continuous shared use of a delivery van by two or more different employees

€ 300 per year € 300 per year

Gifts in kind up to a maximum of € 70 per per employee per year

• only where the work-related costs scheme does not apply

Not applicable 20.00

Benefits/gifts given to other people then own personnel

• value no more than € 136 45.00

• value more than € 136 75.00


Table 7.3 Different rates for special groups of employees

8. Other figures

2015 2014

Minimum amount in customary salary for shareholders with a substantial interest

75/70x wage 2014,either lower/higher

€ 44,000

Pseudo-final levy for severance packages in excess of € 535,000 € 531,000

Pseudo-final levy on past service and a pension basis of more than Expired € 531,000

Income standard for 30%-facilityCertain salary standards (i.e. taxable salary) apply for incoming employees with rare specific expertise.

2015 2014

Post-graduates (holding a master’s degree, who are either studying for or have a PhD) under the age of 30

More than € 27,901 More than € 27.653

Certain groups of academics and medical trainees/research fellows No income standard No income standard

Others More than € 36,705 More than € 36,378

2015 2014

Artists and professional athletes

• resident in the Netherlands 36,50% 36,25%

• resident in a (tax) treaty country 0,00% 0,00%

• resident in a non-treaty country 20,00% 20,00%

Contracters, home workers, sex workers and similar occupations

• with tax credit 13,00% 14,00%

• without tax credit 36,00% 36,00%


Amsterdam Region

P.O. Box 7925 Johan Bos1008 AB Amsterdam [email protected] tel.: 088 407 11 14

Antoine Brons [email protected] tel.: 088 407 30 14

Rotterdam / The Hague Region

P.O. Box 90636 Marcel de Vreede2509 LP DEN HAAG [email protected] tel.: 088 407 37 67

P.O. Box 2295 Guido van Ankum3000 CG ROTTERDAM [email protected] tel.: 088 407 37 70

Jan-Bertram Rietveld [email protected] tel.: 088 407 83 22

Peter Sassen [email protected] tel.: 088 407 83 16

Contacts in the Human CapitalPractice Group of EY Belastingadviseurs LLP


North East Region (Zwolle / Arnhem / Utrecht)

P.O. Box 30116 Renzo van der Ham 6803 AC ARNHEM [email protected] tel.: 088 407 63 22

Emanuel op het Veld [email protected] tel.: 088 407 61 46

P.O. Box 634 Anke van der Locht 8000 AP ZWOLLE [email protected] tel.: 088 407 61 27

Southern Region (Eindhoven / Maastricht)

P.O. Box 455 Elianne Belleflamme5600 AL EINDHOVEN [email protected] tel.: 088 407 47 77

Miriam Michiels [email protected] tel.: 088 407 45 51

Ilse Jansen [email protected] tel.: 088 407 83 24

P.O. Box 100 Theo van Schendel6200 AC MAASTRICHT [email protected] tel. 088 407 34 96

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About Human CapitalHuman Capital specializes in many aspects of national and international employment, labour relations and employment conditions. In the international area we provide advice on the tax and social security legislation aspects of cross-border working (Global Mobility and International Social Security). We have a worldwide network that we can draw on for this. Residence permits and work permits (Business Immigration) are other areas of expertise, along with international payroll accounting (IPD). In the national context, this specialism takes the form of advising on various forms of remuneration, such as employee share schemes and other employment conditions and benefits. This area of Human Capital also provides specialist services related to payroll tax and social security, such as conducting risk analyses, implementing the work-related costs scheme and providing support during wage tax audits by the Tax and Customs Administration, as well as providing advisory services and support further to assumed liability by the Tax and Customs Administration. This also includes lodging objections and conducting appeal proceedings in the field of payroll tax.

ContactFor further information please contact the Human Capital practice group, EY Belastingadviseurs LLP. Members of this practice group can be found in all regions. Their names and contact details can be found on the previous page.

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