Budget Day 2026: Rewards & Benefits changes for employers and employees

Increase of the tax-free travel allowance

The Dutch Government proposes to increase the maximum tax-free travel allowance from EUR 0.23 to EUR 0.25 per kilometre, with retroactive effect to 1 January 2026.

The proposal codifies an existing policy decree that was introduced following the energy price shock resulting from developments in the Middle East. The increase is intended to compensate employees for higher commuting and business travel expenses.

Abolition of the exemption for industry-specific products

Under current legislation, employers may provide employees with products originating from their own industry at a discount without triggering wage tax consequences. The current exemption applies to discounts of up to 20% of the fair market value, subject to a maximum of EUR 500 per employee per calendar year.

The Dutch Government proposes to abolish this targeted exemption as of 1 January 2027. Employers wishing to continue providing industry-specific products or discounts without triggering taxation at employee level would need to designate the benefit as final levy wage under the Dutch work-related costs scheme (werkkostenregeling).

The valuation of industry-specific products will continue to be based on their fair market value. In addition, discounts on industry-specific products provided to former employees will remain subject to mandatory final levy treatment.

Wage tax rates, tax credits and limited indexation

The legislative proposal includes the wage tax and income tax rates for 2027. The rates applicable to the first two tax brackets will be increased. At the same time, the employment tax credit (arbeidskorting) will be increased by EUR 173, while the elderly person's tax credit (ouderenkorting) will be reduced by EUR 100.

In addition, the statutory inflation correction mechanism will be approximately halved. According to the Dutch Government, this limited indexation constitutes the so-called “freedom contribution” of citizens. The corresponding contribution by businesses will be implemented through an increase of the disability fund contribution (Aof-premie).

Gradual tightening of the youngtimer regime

The private use of a company car is taxed through a taxable benefit that is calculated based on the vehicle’s catalogue value. For so-called youngtimers (i.e., cars older than 15 years), a different valuation basis applies: 35% of the vehicle’s fair market value. Under the youngtimer scheme, the age threshold will increase to 17 years in 2027 and to 20 years in 2028. Transitional rules will apply to cars that were made available to employees no later than 31 December 2025. The government intends to give users more time to adjust their vehicle fleet or employment conditions.

Freeze of the maximum pensionable salary base

The maximum salary base for tax-facilitated pension accrual in the second-pillar pension system and third-pillar annuity arrangements amounts to EUR 137,800 in 2026. It is proposed that this threshold will not be indexed during the period 2027 through 2032. As a result, future inflation adjustments will not increase the maximum salary amount that qualifies for tax-facilitated pension accrual.

Amendments to the pseudo-final levy on fossil-fuel company cars

As of 1 January 2027, the pseudo-final levy for fossil-fuel company cars will enter into force as already included in the 2026 Tax Plan. Under this regime, employers are liable to a 12% pseudo-final levy calculated on the catalogue value of a fossil-fuel passenger car that is made available to an employee for private use. For these purposes, commuting is treated as private use. Under the transitional rules included in the 2026 Tax Plan, employers are not subject yet to the pseudo-final levy on fossil-fuel passenger cars, provided that the car was first made available to the employee before 1 January 2027. The 2027 Tax Plan proposes extending the expiry date of this transitional regime from 16 September 2030 to 31 December 2030.  

The 12% pseudo-final levy will not apply to (i) a fossil-fuel passenger car that is made available for no more than fourteen days per calendar year as a replacement vehicle (for example during maintenance of the regular company car), and (ii) driving school vehicles used in connection with driving lessons.

Under certain circumstances, the taxable base that is subject to the pseudo-final levy on fossil-fuel company cars may also be taken into account when determining the pseudo-final levy on excessive severance payments. To prevent double taxation, the Government proposes to introduce a specific anti-cumulation provision.

Start-up and scale-up fiscal stimulation Act

The legislative proposal introduces a specific tax regime for employee stock options granted by qualifying start-ups and scale-ups, with the aim of making the Netherlands a more attractive location for innovative businesses.

The proposed regime includes a reduction of the taxable base, under which, subject to certain conditions, only 65% of the benefit derived from a stock option right or the capital gain realised upon the sale of the acquired shares is treated as taxable employment income. A second key feature of the regime is the possibility to defer taxation until the actual disposal of the shares, rather than taxing the benefit upon exercise of the stock options.

The proposal was previously opened for public consultation on 1 April 2026. For further information regarding the consultation proposal, we refer to our earlier publication: Draft bill on the fiscal stimulation of start-ups and scale-ups opened for public consultation.

Compared to the consultation proposal of 1 April 2026, the current legislative proposal contains a number of significant changes, including the following:

• The proposed Box 3 measures that formed part of the consultation proposal have been removed. The legislative proposal is now limited to employee participation schemes within the scope of Dutch wage tax.
• The regime has been expanded for international group structures. Under the current definition, companies outside the Netherlands may also apply for a qualification decision from the Netherlands Enterprise Agency (RVO) to be recognised as a qualifying start-up or scale-up.
• In light of EU State aid rules, the stock option rights must be granted by a withholding agent that complies with the relevant EU requirements.
• Additional measures have been introduced for employees in cross-border situations. The proposal includes a step-up upon immigration, an exit tax upon emigration through a protective tax assessment, and specific rules addressing remigration.
• In addition to options over shares or depositary receipts in the withholding agent itself, the proposal extends the regime to stock options granted in a qualifying parent company. A qualifying parent company must directly or indirectly hold at least a 50% interest in the withholding agent. Both the withholding agent and the parent company must obtain a qualification decision from the RVO.
• Under the current proposal, the stock options or the shares acquired upon exercise may not be transferred during a period of two years following grant, unless the company is sold or listed on a stock exchange at an earlier stage.
• The 65% taxable base reduction applies only to the portion of the appreciation in value that exceeds the fair market value of the underlying shares at the time the option was granted. Consequently, stock options that are already “in the money” at grant only partially benefit from the regime.
• In addition to employees holding a lucrative interest, employees holding a substantial interest are also excluded from the regime under the current proposal.

Although the legislative proposal, like the consultation proposal, contains a definition of a start-up and scale-up, the assessment framework remains unclear. In particular, the proposal does not provide sufficiently detailed criteria that would enable businesses to assess in advance whether an application for a qualification decision with the RVO is likely to be successful.

The proposals discussed in this article are still subject to parliamentary consideration and approval and may therefore be amended before being enacted.

Contact

If, after reading this news update, you would like further information on any of the topics discussed, or if you are interested in an introductory discussion without obligation, please contact your Loyens & Loeff adviser or one of our advisers from the Rewards & Benefits team. We would be pleased to assist you.