Are you ready for 2017? Blogs
17 nov, 2016
As we are rapidly approaching the end of the year we would like to take this opportunity to inform you about important items for the year end closing of the payroll administration. In this newsletter the following subjects will be discussed:
- Year end checklist
- Work Costs Scheme
- Expenses to be included in the payroll
- Annual reports
If you have any questions with regards to the information below, please contact your contact person within Arvode via +31 30 69 40 480 or via firstname.lastname@example.org.
Year end checklist
With the year end approaching it is important to have all relevant items included in the payroll administration before the last payroll tax return is submitted and for us to be able to prepare the annual reports. Please find below a checklist:
- Are there expenses which still need to be included in the payroll?
- Please send these along with the December changes to your contact person for processing.
- If you have any doubts on taxation please consult us.
WCS data 2016
- Please provide us with the relevant information for the year 2016. For example; gifts, dinners (no business purpose), staff parties.
- If you provide us with this information before the 1st of January 2017 we will process this in the first wage tax declaration of 2017.
- If applicable a final settlement for the WCS 2016 will follow immediately through the first wage tax declaration of 2017.
Gifts to others than employees
- If you have provided gifts to others than your own employees it is allowed for you as an employer to pay final levy over these amounts for these persons or organizations.
- This is only case if the gifts provided are also provided to your own employees for the same occasion. The percentage of final levy is 45% and the gift may not exceed the amount of €136. If the amount does exceed the €136 you have to pay 75% of final levy over the total amount of the gift.
- Please send us a list of gifts provided to others, including VAT.
- If you provide us with this information together with the December changes it will be processed in the last wage tax declaration of 2016.
Work Costs Scheme (WCS)
As of 2015 the WCS is mandatory for all organizations. This was extensively explained in several of our previous newsletters. In this scheme it is allowed to use a certain percentage of your total fiscal wages (the so called ‘tax free margin’) for untaxed compensations and benefits. For example: parking fees, bicycle plans and Christmas gifts. For 2016 this percentage is 1.2%.
The organization can appoint their own ‘work costs’ and distribute them at their discretion, but the organization has to comply with the conventionality test. This means that all untaxed compensations and benefits in your organization can not deviate more than 30% from what is usual in similar circumstances. The compensations and benefits exceeding the 30% margin are considered as fiscal taxable wage for the employee.
The amount within the ‘tax free margin’ is untaxed and the amount exceeding the ‘tax free margin’ will be taxed at 80% with the final levy.
Some reimbursements are not included in the 1.2% tax free margin, but still not due to any tax, for example: the untaxed commuting allowance of (max) €0.19 per kilometer and the reimbursement of study, educational costs or company fitness.
Financial administration and general ledger changes
The WCS requires collaboration between your financial department and payroll administration. Your financial administration should show how you apply the WCS in your organization.
It is very important to know the total amount of paid out provisions and reimbursements (including company parties, business travels, business meetings, meals, gifts to employees, cash payments, etc.) and the total salary costs. This is a challenge for most companies, as provisions and reimbursements are often paid out by the financial department, while the calculation of the salary costs are often made by the payroll administration.
The elements that are important for the WCS are applicable for the payroll as well as the financial administration. Employee declarations are usually handled in the financial administration, but this can also influence/affect the payroll. The reverse is also important: WCS costs that are paid out through payroll need to be correctly processed in the financial administration. Travel expenses for example have to be correctly booked according to the general ledger in order to be able to provide a correct overview for the Dutch Tax Authorities during an audit.
We advise our clients to treat the wage types in the payroll as well as the financial administration exactly the same. We can assist with matching the general ledger to the work costs scheme. Costs that are applicable for the WCS have to be processed individually in the financial administration. It is also possible to choose a more detailed categorization of costs, by using the following main categories:
- specific exemption
- special appreciation (naught and some fixed amounts)
- tax free margin (1.2 % of the fiscal wages)
- intermediary costs
- taxable wages
- untaxed wages based on other schemes
Deadline WCS data
In order to finalize the year 2016, we need to receive an overview of untaxed compensations and benefits that need to be incorporated in the ‘tax free margin’. If applicable these amounts should include the VAT (BTW).
If you require assistance with deciding which costs are applicable we can provide assistance. We also need to receive a summary of costs that you would like to incorporate in the ‘tax free margin’ for 2017. It is possible that these costs differ from the costs the organization has appointed for 2016.
When this data is sent to us before the 1st of January 2017 we can guarantee that it can be processed in the first wage tax declaration of 2017. If applicable a final settlement for the WCS 2016 will follow immediately through the first wage tax declaration of 2017.
If you have reimbursed expenses tax free to your employees and are having doubts if these are taxable or not, please contact us for further advice. Supporting documentation such as receipts must be kept with your administration.
Fixed expense allowances
When you provide your employees with a fixed expense allowance, please remember that you need to be able to provide supporting documentation (such as receipts) in case of a wage tax audit. We advise to regularly submit the supporting documentation to the tax inspector and to ask for an approval in order to avoid any liability in case of a wage tax audit.
Employees with a 30% ruling
When you reimburse other costs to your employee besides the 30% ruling, these costs are taxable and should be included in the Dutch payroll.
- Utility costs (or Cost of living allowance);
- Costs for the application or transition of official personal documents such as residence permits, VISA and driving licenses;
- Costs for medical examinations and vaccinations needed;
- Double housing costs for employees that keep residence in their home country and for example also have hotel costs in the host country;
- The (first) housing costs;
- Storage costs for the part of the inventory that will not be moved to the host country;
- Home leave costs for travel to the home country for family visits;
- Extra costs for the preparation of annual income returns;
- Language course training for the employee and his/her family to learn the language in the host country;
- Extra (private) phone costs for calls to the home country;
- Costs for the application of a social security certificate such as a A1 or E101;
- Allowances related to the assignment (foreign service premium, expat allowance, overseas allowance);
- House purchase or sale related expenses (such as brokers fee);
- Compensation for higher tax rates in the host country (tax equalization).
When you reimburse costs as mentioned above to your employees and these have not yet been processed in the Dutch payroll we request you to inform us as soon as possible.
Other tax free reimbursements
When you apply the 30% ruling for an employee the following costs can be reimbursed tax free:
- Moving costs for temporary storage or transfer of the inventory;
- Costs for an acquaintance visit of the employee to the company in the host country;
- Costs for the application or extension of a work permit;
- School fees for an international school or a Dutch school with an international department.
After all the information has been processed in the 2016 payroll administration, we will provide you with the annual reports over 2016. Before the 28th of February 2017 you will receive the annual reports and the employees will receive their annual statements.
We understand you may have questions based on the information provided above. If you have any questions with regard to the information above please contact your contact person within Arvode via +31 30 694 0480 or via email@example.com.
In our next newsletter we will inform you about all the relevant changes for the 2017 payroll administration.
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