Special Work-related Expenses Scheme 2015

Transcription

1 Special Work-related Expenses Scheme 2015 Audit І Tax І Advisory

2 Work-related Expenses Scheme 2015 Table of Contents 1. Introduction 2 2. Cost categories 2 3. Structure 3 4. Discretionary margin 4 5. Employment-law consequences 5 6. What next? 5 Annexes Crowe Horwath Accountancy & Belastingadvies Amsterdam PO Box BD Amsterdam T: +31(0) F: +31(0) Rotterdam PO Box AH Rotterdam T: +31(0) F: +31(0) Nijmegen PO Box AL Nijmegen T: +31(0) F: +31(0) E: info@crowehorwath.nl I: No liability is accepted for any incompleteness or inaccuracies in this newsletter despite the fact that it has been drawn up with the greatest possible care. The broad and general nature of this newsletter means that it is not intended to provide all information that is needed to make financial decisions. 1

3 1. Introduction The Work-related Expenses Scheme was introduced on 1 January This scheme replaces the old system of untaxed compensations and distributions. The object of the Workrelated Expenses Scheme is to simplify the granting of compensations and distributions to employees. The Work-related Expenses Scheme and the old system will continue to exist next to each other until the end of This will allow the employer to choose in which year the transition to the Work-related Expenses Scheme will be made. The Work-related Expenses Scheme will become mandatory for all employers in the Netherlands as of 1 January In short, this means that you are allowed to give 1.2% of your company's wage bill in untaxed compensations and distributions (discretionary margin). You are allowed in principle to distribute this amount among the employees yourself. All compensations and distributions you grant in a single year are added together. Any compensations and distributions that exceed the discretionary margin will be subject to 80% final levy. Said 80% is added to the amount of the compensation or distribution and is payable by you as the employer. For example: Your company has a wage bill of 700,000. Your discretionary margin is 8,400. The compensations and distributions are untaxed if their value remains below 8,400. If the value of the compensations and distributions exceeds 8,400 you will have to pay an 80% final levy on the excess. The introduction of the Work-related Expenses Scheme means that the rules concerning untaxed compensations and distributions from the "old" system will disappear. Without an inventory and analysis you run the risk that compensations are taxed (after the fact) against an 80% final levy (possibly increased by a fine). We recommend that you chart all compensations and distributions you provide to your employees and assess what is and what is not covered by the new scheme. As regards these compensations and distributions you should think not only of the untaxed compensations but also of the taxed compensations. You cannot merely assume your (salary) administration; you should also take into account the compensations that are not included in the salary administration. 2. Cost categories In principle, all work-related expenses (compensations/distributions) are considered to be salary for the purpose of the application of the Work-related Expenses Scheme. And the aforementioned discretionary margin and the 80% final levy apply. The legislator has exempted several categories, however. It is therefore important for the application of the new Work-related Expenses Scheme that all 'work-related expenses' are categorised. We have provided the main work-related expenses categories below: Benefits outside of employment Distributions that are made by the employer in a capacity other than as employer do not qualify as salary. This category includes for example (the costs of) flowers in the case of illness or a wreath in the case of death. The personal relationship between the employer and the employee is of first and foremost importance in connection with such distributions. The small gifts regulations of the Tax and Customs Administration may offer a solution if there are uncertainties concerning the qualification of a certain distribution. 2

4 Intermediary costs Intermediary costs are the costs that are related to the employees, but which are actually the company's. These include for example the costs the employer compensates to the employee that are related to a lease car (washing, parking fees) or a business lunch or a business dinner. Nil valuation Several compensations and distributions may be valued at zero for the purpose of the Work-related Expenses Scheme, which means that they do not actually take up the discretionary margin. Think in this connection for example of health and safety facilities, refreshments in the workplace (not being meals), uniforms and work clothing (provided specific conditions are satisfied). Specific exemptions It has been determined for several items that they may be compensated or provided without taxation. This includes, inter alia, compensations for business travel using personal transportation (at most 0.19 per kilometre), costs of business travel using public transportation, courses, conventions, etc. to the extent these are relevant to the work and food and accommodation during business travel. State Secretary of Finance Eric Wiebes recently committed that a specific exemption will be introduced for industryspecific products (such as personnel discounts) in Limited necessity criterion Another commitment of the State Secretary concerns the introduction of the (limited) necessity criterion. In the event an employer considers a particular facility necessary within the context of its business operation, it will be allowed to provide this to its employee untaxed. The necessity criterion will only apply (for the time being) to equipment and computers, mobile means of communication and other such equipment. For example, if an employer considers a tablet (IPad) necessary for its business operations, it will be allowed to provide one to its employee untaxed. If the compensations and distributions are not classified in one of these categories, the employer will have the option of designating these compensations and distributions as individual salary (taxed at the employee) or as wages for final levy purposes (untaxed if the discretionary margin of at most 1.2% of the gross wage bill is not exceeded). This option is limited, however. For example, company cars, company residences and compensation of fines are always individual wages (taxed at the employee). And finally, there are several special forms of wages for final levy purposes that are not covered by the Work-related Expenses Scheme and therefore not part of the discretionary margin. It concerns for example the private use of delivery vans used continuously and alternately and gifts and distributions to third parties. 3. Classification of the compensations/distributions to your personnel Once you have decided what compensations and distributions you are giving to your employees, you will be able to classify them in the various cost categories. Determine the tax classification of each compensation and/or distribution within the Work-related Expenses Scheme. You will then be able to provide insight into the financial consequences of the Work-related Expenses Scheme for your company (assess whether the discretionary margin is sufficient). Annex 1 includes a non-exhaustive list of several compensations and distributions, classified by category. 3

5 For example: You employ 3 persons to whom you provide the following each year: a staff party at an external location that costs 500; a travel allowance of 0.19 per km, totalling 1,200; Christmas boxes worth 210; internet allowance for internet at home 420; a telephone with a value of 250 which you consider to be necessary for your business operations; shop floor work clothing with a value of 200; coffee facilities on the shop floor with a value of 500; The following costs are part of the discretionary margin: Staff party 500 Travel allowance specific exemption Christmas box 210 Internet allowance 420 Telephone necessity criterion Clothing (if it can be worn outside of work) 200 Coffee facility nil valuation Total This example includes an amount of 1,330 that is covered by the discretionary margin in the Work-related Expenses Scheme. The compensations and distributions that are granted within the discretionary margin must be recorded separately. The invoice value may be assumed if an invoice is available (including VAT). The market value will apply if no invoice is available. 4. The discretionary margin As stated above, the employer has the option of designating certain compensations and distributions as wages for final levy purposes. A final levy is owed on the wages for final levy purposes to the extent these exceed the discretionary margin. This discretionary margin amounts to 1.2% of the total wage bill. This is in principle the wage bill of the year in which the scheme is applied. The State Secretary recently indicated in a letter to the House of Representatives that an annual settlement system will be introduced in This means that employers only have to determine once a year what tax they owe within the context of the Work-related Expenses Scheme. This means that it will no longer be necessary to assess whether the discretionary margin is exceed during each tax period. This does not alter the fact that it is important to keep monitoring changes in the wage bill throughout the year, so that you can anticipate the ultimate amount of the discretionary margin in a timely manner. The State Secretary indicated in the same letter that a group scheme will be introduced in the Work-related Expenses Scheme as of 1 January There will then be a single generic discretionary margin within the group within which all compensations and distributions designated by the relevant withholders can be compensated untaxed. This means that it will no longer be necessary to make a division within the intra-group relationships. 4

6 You are free to distribute the discretionary margin among the company's employees as you see fit. An important condition is that the compensation may not exceed what is customary by more than 30%. For example, a kilometre allowance for business kilometres of 2.50 per kilometre or a Christmas box worth 10,000 is not customary. Any compensations and distributions you provide that exceed the discretionary margin will be subject to 80% final levy. The final levy is entirely for the account of the employer. No national insurance contributions will be due. For example: Company C's wage bill is 700,000 The discretionary margin is 1.2% * 700,000 = 8,400 Assume that the value of the compensations and distributions is 15,000; such would mean that the final levy to be paid equals 80% * (15,000-8,400) = 5, Employment-law consequences It is important within the context of the implementation of the Work-related Expenses Scheme that you perform an inventory of the employment-law consequences. It might be advisable to adjust the terms of employment if it becomes clear that certain contractual commitments are no longer untaxed under the Work-related Expenses Scheme. This is particularly relevant where it concerns fixed expense allowances. Terms of employment cannot be adjusted unilaterally without reason. You may be bound by a Collective Labour Agreement that includes certain compensations. And even if the Collective Labour Agreement does not constitute an impediment, you will still need the approval of the employees or the works council for an adjustment. If you do not ask for this approval, the employee may enforce compliance with the terms of employment in court. You should therefore coordinate adjustments with your works council or your employees in advance. You will be able to prevent problems by assessing in a timely manner what consequences the Work-related Expenses Scheme will have under employment law. 6. What next? We recommend that you take several steps in the near future: Assess what financial consequences the Work-related Expenses Scheme has for your company If it follows from the calculation that the value of the compensations and distributions exceeds 1.2% of the wage bill, you may still be able to take action before 1 January 2015 to mitigate the financial consequences. This may lead to adjustment of your terms of employment. Determine how compensations and distributions of new members of staff should be handled You may consider not providing fixed compensations and distributions to personnel you hire at this time or to provide these only subject to the condition that these may be adjusted at the time the Work-related Expenses Scheme is introduced. 5

7 Make preparations in your financial and payroll administration The implementation of the Work-related Expenses Scheme means that your financial administration has to be adjusted. The reason is that the Work-related Expenses Scheme must be evident from your financial administration. You can do so for example by adding account lines or by adjusting ledger accounts. You should bear in mind that the work-related expenses must be recorded inclusive of VAT for the purpose of the application of the Work-related Expenses Scheme. Implementation of the Work-related Expenses Scheme may lead to adjustment of your internal working and consultation processes. Inventory form You can use our inventory form (see annex 2) to establish an accurate picture of how the Work-related Expenses Scheme will turn out in your situation and this to us. We will then contact you to make an appointment. Annex 1. Non-exhaustive list of compensations and distributions by category You will find below a non-exhaustive list of several compensations and distributions, classified by category. Items within the fixed amount (discretionary margin): Christmas boxes Meals in company cafeterias, fixed savings value 3.15 (2014) per meal Company fitness at an external location Personnel association membership fees (Electronic) bicycle Internet at home (unless it concerns an Occupational Health and Safety home office) Staff parties at external locations / staff trips Professional literature (unless it concerns an Occupational Health and Safety home office) Work clothing that is taken home and that is also suitable for wearing at home. Items that are not at the expense of the discretionary margin in connection with the nil valuation: Health and safety facilities Professional literature at work Refreshments during working hours that are not part of a meal Work clothing that is exclusively or almost exclusively suitable to be worn during work and work clothing that remains at the workplace Company fitness at work Staff parties at work Necessity criterion Equipment Computers Mobile means of communication and similar equipment (mobile phone, tablet, portable computer) Specific exemptions Meals as a result of overtime, evening opening, business travel, etc. Travel allowance, personal transportation claims of at most 0.19 per kilometre Employee study costs Industry-specific products 6

8 The current tax rules will continue to apply in respect of cars and delivery vans. Entertainment expenses and business gifts for external relations and clients constitute intermediary costs. Annex 2. Inventory in connection with the Work-related Expenses Scheme Company name Contact person yes/no/n/a Description General compensations Fixed expense allowances. If so, indicate what these items consist of in the column "description". Specific compensations Business travel, commuting, at most 0.19 per km or the actual costs of public transportation Travel allowances, claims for travel with personal transportation exceeding 19 cents per kilometre. Annual public transportation pass and off-peak discount pass if they are used for work as well Bicycle, electronic bicycle, scooter, etc. Subordinated airplane tickets airline companies and the like Parking, ferry and toll fees (in the case of non-company cars) Non-recovered traffic fines Extraterritorial costs (30% scheme) Meals, accommodation in the case of business travel Meals with business relations or as a result of overtime, evening openings and the like 7

9 Food, lighting or heating in combination with irregular shifts or continuous shift work Meals in cafeterias Refreshments at work, not forming part of a meal Facilities in the workplace (not being a home office) Health and safety facilities Company fitness at the workplace Company fitness elsewhere Work clothing that remains at the workplace or is (almost) exclusively suitable for wearing at work Work clothing that is taken home and that is also suitable for wearing at home. Personal care Entertainment costs and business gifts given to employees Work space at the employee's home Equipment, tools and instruments for home use Mobile phone, blackberry or smartphone Portable computer, notebook or laptop Internet at home Professional literature at home Professional training courses, conventions, seminars, symposia, excursions and study travel Educational expenses Outplacement Trade union membership fees 8

10 Contribution staff association Christmas boxes and other small gifts Staff parties, staff trips, etc. Industry-specific products (staff discount) Interest benefits of loans provided to staff (other than mortgage loans) Accommodation outside the place of residence as a result of permanent activities elsewhere Purchase or sale costs related to the home in the case of removal, not being company relocations Removal costs Damage resulting from theft while fulfilling the duties of the employment Damage resulting from natural disasters that are generally not insured Other compensations/distributions not mentioned: Please return to service@crowehorwath.nl or your relationship manager 9