The work-related costs scheme for foreign employers in the Netherlands: the options

24 January 2024

According to Dutch tax law, everything you as an employer pay for your employee or provide to your employee is considered wages. This does not have mean that all wages are taxed with Dutch wage taxes. Provided you apply the work-related costs scheme correctly, it offers possibilities for tax-free allowances and benefits in kind to employees. 

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Loes van Baast Global mobility specialist | Tax
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Main rule and exceptions

In 2024, the free margin on your taxable wages up to and including € 400.000 is 1,92%. Over the amount of wages above € 400,000, the free space in 2024 is 1.18%. This fixed amount is known as the discretionary margin. As soon as you exceed the discretionary margin, you as an employer pay tax on this excess at a rate of 80 percent. Exceptions to the above main rule are the specific exemptions, nil valuations and intermediate costs. These exceptions are not charged to the discretionary margin or are charged as a fixed amount.

Specific exemptions

Specific exemptions are specific cost items that you can reimburse or provide to employees tax-free. For example, costs for a temporary stay elsewhere or travel allowances for business kilometres of € 0.23 per kilometre are specifically exempted. In addition, the provision of certain equipment to the employee, such as a laptop or mobile phone, is also specifically exempted, provided you meet all the conditions.

Nil valuations and standard valuations

In addition to the specific exemptions, certain costs for application of the work-related costs scheme are valued at zero or a fixed amount. In particular, costs related to the workplace, such as the costs for drinks at the workplace, belong to the so-called nil valuations. An example of a standard valuation is meals at the workplace. You can value this at a fixed amount of € 3.90 per meal.

Intermediate costs

Intermediate costs are costs that belong to the employer, but which the employee pays up front. Costs for washing the company car are an example of these costs. 

When does the work-related costs scheme apply?

All employers who are withholding agents for the Dutch wage tax are (in principle) affected by the work-related costs scheme . Costs for reimbursements, benefits in kind and provisions do not automatically fall under the discretionary margin of the work-related costs scheme. In order to be able to rely on the tax facilities that the work-related costs scheme offers, you as an employer are obliged to describe these costs. The costs must also be apparent from your financial administration.

Employer in the Netherlands who is not subject to withholding obligations

But how does the work-related costs scheme work for employees with a foreign employer who is not subject to withholding obligations in the Netherlands? These employees who are taxable in the Netherlands may effect an exemption equal to the percentage of the discretionary margin in their personal Income tax return.

More information

Would you like to know more about the conditions of these tax options or about the specific consequences for your situation? Don't hesitate to contact Loes van Baast, global mobility specialist - tax, on telephone number: 040-2942601 or send Loes an e-mail.

Do you want to know more about the work-related costs scheme? Our specialist will gladly assist you.

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Global mobility specialist | Tax