Via this newsletter we would like to inform you on the relevant updates from a Dutch wage tax perspective, which are relevant for employers in 2023.
Summary
Tax rates 2023
| Tax bracket | Taxable income | Tax rate | Combined tax rate (Including contributions for national insurances) | |
| 1) | € 0 – € 37,149 | 9.28% | 36.93% | |
| 2) | € 37,150 – € 73,031 | 36.93% | 36.93% | |
| 3) | As of € 73,032 | 49.5% | 49.5% |
Salary threshold 30%-ruling
|
| Taxable salary (incl. 30% tax-free allowance) | Taxable salary (excl. 30% tax-free allowance) | |
| Regular situations | € 59,935 | € 41,954 | |
| Special situations – individuals younger than 30 with a qualified master’s degree/ researcher/ doctor | € 45,559 | € 31,891 |
Changes to the Dutch tax treatment of employee stock options
Under the old legislation (applicable up to 31 December 2022), (qualifying) employee stock options were taxable when the option was exercised. Under the new legislation (per 1 January 2023), the taxable moment of the stock options will be dependent on whether the underlying shares received upon exercise of the stock options are immediately freely tradeable. In short, there are three different possible scenarios:
1. Taxation upon exercise, if the underlying shares are immediately tradable (or upon disposal of the share option right if earlier). The taxable benefit is the market value of the shares at the time of exercise, minus the costs related to the exercise.
2. Taxation once the shares become tradable (if the underlying shares are not immediately tradable). The taxable benefit is the market value of the shares at the time they become tradeable, minus the costs related to the exercise. Special rules will apply in relation to IPOs/listed companies (anti-avoidance rules to avoid unlimited tax deferral).
3. Elective regime. Taxation upon exercise if the underlying shares are not immediately tradable, but the employee elects the moment of exercise as taxable moment (elective regime). The taxable benefit is the market value of the shares at the time of exercise, minus the costs related to the exercise. A discount on the value of the shares may possibly apply due to the fact that the underlying shares are not freely tradeable (‘lock-up discount’)
For the moment of exercise to be the taxable moment, the employee should declare in writing to the employer that they would like to opt for the elective regime (no later than the moment of exercise). The employer should keep this declaration as part of the wage tax administration.
For completeness’ sake it is noted that the aforementioned changes only apply to employee stock options and not to other types of equity, such as restricted stock units.
Tax treatment of dividends
It is of importance to note that because of the above, all benefits accruing following the untradeable shares before they have been subject to Dutch wage tax will be taxed as employment income as well. As a result, there is a potential risk of international mismatches when in the Netherlands the dividends following a blocked share would be seen as wage while these would be regarded as dividends abroad. Similarly, attention is required for internationally active employees in relation to capital gains taxes other jurisdictions might levy upon alienation of the shares.
Changes to the Dutch expat tax regime (30% ruling)
The maximum 30% ruling tax free allowance will be capped as per 1 January 2024. This will be done by limiting the basis of this tax-free allowance to the regulated maximum remuneration for the public sector (2023: EUR 223,000 gross annual remuneration, indexed annually).
For high earners, the 30% ruling in practice reduces their effective Dutch marginal income tax rate from 49.5% to 34.65% (i.e. 49.5% tax rate x 70%). As a result, the connected tax-free allowance will be capped at approx. EUR 66,900 on an annual basis (EUR 223,000 x 30%). As such, the effective maximum net tax saving would be capped at approx. EUR 33,000 (EUR 66,900 x 49.5%) per employee per year.
Transitional law applies for individuals for whom the 30% ruling was applied in payroll in the last wage tax period (loontijdvak) of 2022 (typically: December 2022). For these existing cases, the cap of the tax-free allowance will apply only as per 1 January 2026, resulting in a de facto transitional period of three years. For individuals who will have the 30% ruling as per 2023, the cap of the tax-free allowance will apply as per 1 January 2024.
‘New’ Information reporting obligation in relation to payments to non-
qualifying self-employed individuals
From the 1 st of January 2022, a new obligation to exchange information with the DTA was introduced (“renseigneringsverplichting”). The obligation is applicable to ‘wage tax withholding agents’ in the Netherlands. The new information obligation applies when a withholding agent makes a payment to a non-qualifying self-employed for work and services performed for either the withholding agent itself or an entity affiliated with the withholding agent (e.g. services being invoiced without VAT).
The withholding agent is obligated to report the details of such payments (and certain personal information, such as Dutch fiscal number of the individual) to the DTA no later than 31 January of the following year. For the first year (2022), this means that the deadline to report this information is 31 January 2023. Extension can be requested from the DTA at the competent tax inspector or via the Belastingtelefoon (“Tax Information Line”).
Certain payments are excluded from this information obligation. This means that for payments listed below, no obligation applies to separately report the payments to the DTA:
Under this new legislation, the payments to foreign (non-Dutch) supervisory board members who have not chosen for opting-in are generally in scope, unless the relevant entity making these payments would not qualify as a Dutch ‘wage tax withholding agent’.
Fixed working from home allowance
A new specific exemption has been introduced as of January 1 st, 2022, based on which employers are able to provide employees with an additional tax-free fixed allowance for the additional costs incurred when working from home. This allowance will increase from EUR 2 (2022) to EUR 2.15 (2023) per working-from-home day.
Tax-free travel allowance
The tax-free travel allowance for business travel for almost all types of transportation will increase from €0.19 to €0.21 per km as of 1 January 2023 (and to €0.22 per km as of 1 January 2024) This does not apply for company cars or for travel by plane, taxi or ship.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
© 2023 Vialto Partners. All Rights Reserved.