Tax Plan 2021 - Payroll Taxes
On 15 September 2020 the Dutch government sent the Tax Plan 2021 and other tax measures for 2021 to the Dutch Parliament. This newsletter describes the government’s proposals for payroll taxes.
Adjustment of the discretionary budget of the employment cost regulation
The discretionary budget of the employment cost regulation for total annual wages up to €400,000 will be increased from 1.7% to 3% in 2020. The discretionary budget for total annual wages in excess of €400,000 will be 1.2%. In 2021, the discretionary budget for total annual wages up to €400,000 will also be 1.7%. As of 1 January 2021, the discretionary budget for total annual wages in excess of €400,000 will be reduced to 1.18%. This reduction will be permanent. If the discretionary budget is exceeded, a final levy of 80% on the excess is due by the employer.
The aim of increasing the discretionary budget of the employment cost regulation for total annual wages up to €400.000 is to help small and middle-sized companies in particular to weather the impact of the Corona crisis. The larger discretionary budget may, for instance, be used by employers to offer their employees compensation for working from home. The increase of the discretionary budget, which was announced earlier by the State Secretary for Finance in the spring of this year, will be confirmed in law. The reduction of the discretionary budget to 1.18% for total annual wages in excess of €400,000 is intended as a budgetary measure to cover the increased dedicated exemption from training expenses (see below).
Increase of the specific exemption for training expenses
A specific exemption applies for training and study costs offered by an employer. However, the specific exemption is only applicable to wages from current employment and not, as a rule, to wages from former employment. The Dutch government proposes to extend the application of the specific exemption from training expenses as from 1 January 2021 to wages from former employment as well. This will enable an employer to make a tax-exempt contribution to the training expenses incurred by former staff.