Special Payroll 2011

Transcription

1 Special Payroll 2011

2 Special Payroll 2011 Table of Contents 1. Introduction page 3 2. Employments costs: another choice now page 4 2a Employments costs: specific cost allowances, free pay and zero valuation page 6 2b Employments costs and cafeteria scheme page 7 2c Employments costs and working conditions page 7 3. Company car: an update page 8 4. Employment law update page 8 5. Tips to remember page 11 Although the utmost care has been taken in putting together this newsletter, no liability is accepted for errors or omissions. Because of the broad and general nature of this newsletter, it does not aim to give all the information that is necessary for taking financial decisions. 2

3 1. Introduction The most important part of the 2011 Tax Plan is the employments costs. Although it will be possible to go on using the present system for a further three years, it is important to make a well-founded choice. We also look at things like social security and updates on employment law. In this newsletter you can read the most important rules in the payroll area, including the changes for Changes that were announced in the course of 2010 are also included. Our advisers would be pleased to give you information on all your payroll questions, so if you have any further questions after reading this newsletter, please contact us. Most important changes The most important changes as of January 2011 relate to: the employments costs; more temporary contracts for young people aged up to 27 years; days holiday during illness; electronic payslip. Crowe Horwath Payroll Services Amsterdam PO Box BD Amsterdam T: +31 (0) F: +31 (0) Rotterdam PO Box AH Rotterdam T: +31 (0) F: +31 (0) Nijmegen PO Box AL Nijmegen T: +31 (0) F: +31 (0) Payroll advisers Abdel Ikajouen Dimphie de Winter abdel.ikajouan@crowehorwath.nl dimphie.dewinter@crowehorwath.nl 3

4 2. Employments costs: another choice now From 1 January 2011 the new system for free reimbursements and benefits comes into force under the name 'employments costs'. The employments costs forms part of the 2010 Tax Simplification Act. In 2011, 2012 and 2013 you can choose whether to apply the employments costs or to maintain the existing regulations. After evaluation in 2013, the employments costs will be finally introduced in Only a change to the law can now reverse the final introduction from 1 January Upon application of the existing regulations a restriction applies for staff activities up to 454 per employee per calendar year. In 2010 it was still possible to provide your employees with unlimited staff benefits such as staff trips and parties. With effect from 2011 this is no longer possible. Specifically this means that if you choose to apply the employments costs, you have to take a critical look at your working conditions. Free allowance The current system of free reimbursements and benefits is being abolished and you may yourself designate reimbursements and benefits as job expenses (wages subject to tax deduction at source). You are given a free allowance of 1.4% of the total payroll bill subject to tax (flat-rate amount) that you may allocate to reimbursements and benefits that remain outside the deduction of tax. If you allocate more than this 1.4%, then you have to pay an 80% tax deduction at source on the excess. You must decide at the latest at the tax point (time of payment or provision) whether the wage is regarded as job expenses. The calculation of the flat-rate amount is made for each withholding agent. In this respect the first eight digits of the employer tax ID are important. It is not possible to use a flat-rate allowance elsewhere in the group or to try to optimise the flat-rate allowance by applying for a related group of withholding agents (samenhangende groep inhoudsplichtigen - SGI). Example If your total payroll bill is 1,500,000 and the benefits and reimbursements in your organisation are less than or equal to 21,000, then these are free. However if the value is higher than the amount stated, you then pay 80% on every euro above this. Not everything is counted when determining the flat-rate amount. First of all it will have to be determined whether the reimbursement does fall within the sphere of wages. For example, so-called intermediate costs do not form part of the wages. Examples of intermediate costs are: Employee advances certain business expenses, such as for example an ink cartridge for the office. In case of a business dinner: the expenses of the guests. Fuel for company car paid by employee and claimed back. Entertainment expenses and give-aways. If the amount of the wage is clear, then certain wage components may be valued in a taxfavourable way. For example the benefit of a mobile telephone is valued at zero if this is used for at least 10% business. It is compulsory to count a number of things as wages: Additional tax liability for company car. Enjoyment of company dwelling. Fines. 4

5 General flat-rate amount/free allowance What exactly falls under the flat-rate amount? The things that fall under the general flat-rate amount are listed below: purchase or sales costs for dwellings in case of relocation (not company relocation); subordinated airline tickets for airline companies and related companies; Christmas hampers and other small gifts; parking, ferry and toll charges (not for company car); company fitness training elsewhere; subscription to staff associations; subscription to trade unions; non-recoverable traffic penalties; (electric) bicycle, scooter and so on; accommodation outside the home due to permanent work elsewhere; home Internet and similar communications facilities; meals in canteens; staff parties and similar; personal care; the company s own products reimbursement of travel expenses for travel with own transport exceeding 0.19 per km; interest benefit for loans made to staff (not for mortgage loan); entertainment expenses and give-aways (to employees) for the purposes of internal relations; food, lighting or heating relating to irregular or continuous shifts; work clothing that goes home and may also be worn there; work room for the employee at home. Normal criterion The free allowance could be used by one person, but this is undesirable. For this reason a check is made against the normal criterion. This means that a significant exception (more than 30%) may not be made from what is normal in other corresponding circumstances. This relates to an anti-abuse provision for which the onus of proof lies with the Tax Authorities. Individual wage Reimbursements and benefits in the free allowance may as an option also be counted as the individual wage. Grossing up will then have to be carried out where the premiums for employee insurance and the Care Insurance Act (ZVW) reimbursement should also be counted. In many cases this will not be more beneficial. Valuation of wages in kind Wages in kind are valued using the fair value accounting method. This includes the invoice amount plus VAT. This scheme also applies for the company s own products. As a result the valuation at the amount of the savings by the employee will hereby lapse. Tip So as not to adversely affect the free allowance, you can from now on choose to make certain things available to the employee that were previously reimbursed or provided. Making available means that the employee must give these things back at the end of their employment contract. Examples of this are specialist literature, work clothing, tools and mobile telephones. 5

6 2a. Employments costs: specific cost allowances, free pay and zero valuation Within the employments costs a number of reimbursements and/or benefits are explicitly referred to as a specific cost allowance. These items are not included on balance and so remain tax-free. These then relate to the real business expenses of an employee. Examples include: travel cost allowances up to a maximum of 0.19 per km (both business and travel from home to work); payment for business relocation costs; season tickets and other reimbursements for travel by public transport; costs for in-service training, courses, seminars, training and so on; temporary accommodation costs; meals during overtime hours, late night shopping, business trips etcetera; meals with more than secondary business importance; outplacement; extraterritorial costs (30% scheme); procedures to accredit prior learning (APL procedures); compulsory registration in a professional register. There is also free pay. This covers exempt claims such as: pension claims; regular payments to replace past or future loss of wages; one-off payments upon dismissal; leave; social security and corresponding exempt payments such as: payment from funds such as social fund; payment in case of damage to or loss of personal effects; payment upon death; long-service award (after 25 and 40 years); benefits to third parties (for example Christmas hamper). In addition there are reimbursements and benefits that do in fact fall under the free allowance, but do not reduce this free allowance because they are valued at zero. This involves things like: benefits in the workplace (use of desktop computer, photocopier and telephone landline); benefits governed by the Working Conditions Act (Arbo-wet); refreshments at the workplace (not meals); company fitness training at the workplace; uniforms and work clothing provided they are left at the workplace; telephones (including BlackBerry and smart phone provided the business use is more than 10%); laptop, notebook (provided the business use is 90% or more ); annual public transport season ticket and off-peak travel card (partly for business use); specialist literature at the workplace. Everything else must be reflected in that 1.4% of the total payroll bill. If as an employer you remain within this free allowance, everything remains tax-free. If you go above the 1.4% limit, the excess will be taxed with an 80% tax deduction at source. You can as an employer also decide to charge any taxable part to the employee. The advantage of this is that the total payroll bill increases and the untaxed reimbursements within the free allowance fall, because this no longer involves a reimbursement but wages. 6

7 In the summer of 2010 employers, umbrella organisations and tax advisers responded to the draft Implementation Regulation, including all the details of the employments costs. Based on this response a number of changes were made to in the Implementation Regulation. The changes included the following: 1. there is now one standard amount ( 2.90) for a meal provided by the employer (instead of two separate rates for hot and cold meals); 2. company fitness training at the workplace is now an untaxed benefit. 2b. Job expenses and cafeteria scheme Due to the cafeteria schemes it is possible to convert taxed wages into a fully or partly exempt reimbursement or benefit. The employee can decide the latter himself. An employee is often better off due to the application of a cafeteria scheme. The attraction of a cafeteria scheme often lies in reimbursements and benefits which include a certain private element that is not normally borne by the employer. Examples include: company bicycle; company fitness training; trade union subscription; optimisations of travel costs allowance. Under the new scheme it is also possible to exchange wages against for example a bicycle. There are no longer any tax limits as regards the bicycle. For example a bicycle may be more expensive than the 749 that was previously set and you no longer have to check that the employee uses the bicycle for at least 50% for travel from home to work. You then have to allocate the reimbursement/benefit of the bicycle as a component of the tax deduction at source (job expenses). The reimbursement/benefit is then charged to the free allowance in the employments costs. This is not a problem as long as there is sufficient free allowance. If this is not the case, then it costs you the 80% tax deduction at source on the excess. 2c. Employments costs and working conditions Employments costs and working conditions It is possible that you as employer have established (harmonised) certain reimbursements or benefits with the agreement of the Works Council or that the Works Council has a right of consent based on a covenant. If this is the case and you want to amend the working conditions as a result of the employments costs, then you have to ask the Works Council for consent. But even if the Works Council has consented, an individual employee can still always lodge a protest. The consent of a Works Council in proceedings before the court may be an indication of the reasonableness of the amendment. Collective amendment of working conditions is possible if there is a unilateral amendment clause in the employment contract. In such a clause the employer has the power to make unilateral amendments to the employment contract in the future. Jurisprudence shows that it is not easy for an employer to amend the working conditions in spite of a unilateral amendment clause. Things which must be looked at are whether a phasing out scheme has been made by the employer and the possible consent of a Works Council. 7

8 If you as employer have not agreed a unilateral amendment clause, then another more stringent check is made. Maintenance of the working conditions must then be unacceptable for you as employer in accordance with requirements of reasonableness and fairness. This will in practice rarely be the case. In short: remember that under the employments costs you cannot simply unilaterally amend existing working conditions to the disadvantage of the employee. 3. Company car: an update Own contribution of employees Employees to whom a company car has been made available sometimes pay an own contribution. This own contribution may relate to the private use, as well as to the purchase of a more expensive lease car than permitted. The own contribution may also be seen as a fixed contribution towards the costs, irrespective of whether or not it is used for private journeys. The own contribution must be paid from the net wage and may be deducted from the amount of the additional tax liability. However, in the case of an own contribution for the kilometres travelled from home to work, this may not be deducted from the additional liability because travel from home to work is regarded as business travel. The Employment Taxes Handbook also states that you must agree an own contribution with the employee in advance, for example in the individual employment contract or collectively in the lease scheme/working conditions. If an employee chooses a more expensive lease car than his budget permits, any (higher) own contribution may only be deducted from the additional liability where this relates to the private kilometres travelled. The Supreme Court ruled on this recently. Example Say: an employee may look for a car for a monthly lease payment of 700. He does however choose a car with a lease payment of 800. The employee therefore exceeds the budget by 100 per month, or 1,200 per year. Say that on an annual basis he drives 30,000 km, of which 7,500 km is private. The part of the own contribution that may be deducted annually from the additional tax liability is 300 (7,500 / 30,000 * 1,200). 4. Employment law update Extension of number of fixed-term contracts for young people aged up to 27 years Finally a few updates that you may come up against in your practice in 2011: From 9 July 2010 it is possible to offer employees aged under 27 years four instead of three fixed-term contracts. This is a temporary crisis measure that applies up to 1 January 2012, but may possibly be extended to 1 January The main rule (Article 7:668a BW (Dutch Civil Code)) provides that an employee may be offered a temporary contract a maximum of three times for a maximum total period of 36 months. Interruptions between temporary contracts of less than three months are included in the determination of the total duration of the employment contract. As a result of the temporary crisis measure, it has now become possible to offer young people a further fourth contract. Two conditions apply for the fourth contract, namely: 8

9 the employee must be aged under 27 years throughout the whole duration of the fourth contract; the duration of all temporary contracts together may be a maximum of 48 months. An example to illustrate this: Example Cas works to everyone s satisfaction for Hands On BV. Due to the crisis the P&O department has become more cautious about entering into a permanent employment contract. The details are: Date of birth of Cas: 21 July 1984 End of third annual contract 31 January 2011 Question: Answer: Can Cas be offered a fourth contract and if so, for what period? Cas can be given a new contract up to 20 July 2011 for a duration of slightly over five months. Accrual of days holiday during incapacity for work In January 2009 the European Court of Justice ruled that the statutory days holiday may not lapse during illness. According to Dutch Law days holiday are only accrued over the last six months of incapacity for work. As a result of this judgment a bill to amend the holiday legislation has now been submitted to the Lower House. The bill provides that employees maintain their right to statutory days holiday during illness (four times the agreed working hours per week). In addition it will apply that the statutory days holiday will lapse after eighteen months. This means that the employee must actually take his holiday rights, otherwise he loses them. Employees should in any case be encouraged to take their statutory days holiday in the years in which they have been accrued. Statutory days holiday that are accrued for example in 2011 should then be taken before 1 July Postponing holidays too long may detract from this principle and jeopardise health and safety. Extra-legal days holiday fall outside the new scheme. The limitation period for these days is therefore maintained at five years, counting from the end of the years in which they are accrued. The expiry period does not apply for employees who were not reasonably able to take holiday. Employer(s) and employee(s) can decide to extend the period by mutual agreement. Tip Good holiday and absenteeism records are always important. Not only in case of incapacity for work, but also in case of retirement. In this way you can prevent any disputes. Digital provision of payslip As a result of a change to the law (Article 7:626 BW (Dutch Civil Code)) from 1 July 2010 you may as an employer now provide digital payslips to your employees. Two conditions do however apply for providing a legally valid digital payslip. First of all the express consent of the employee is needed. A notification to an employee that except in case of objection on the part of the employee digital payslips will from now on be provided is not therefore enough. In addition the electronic statement must be provided in such a way that it can be saved by the employee and is accessible for later inspection. Application of 30% scheme The 30% scheme is a tax allowance that is often applied for foreign workers who come to work in the Netherlands. They often incur extra costs for travel and accommodation. The aim of the scheme is on the one hand to make it more attractive for foreign workers to come to work in the Netherlands by applying a lower tax rate and on the other hand to reduce the administrative burden on the employer. 9

10 The 30% scheme applies for employees who have employment. The 30% scheme should be applied for by means of a joint request to the Tax Authorities from the employer and the employee within four months after the employee starts work. In order to apply the 30% scheme, a number of conditions apply: The employee must have been posted to the Netherlands or recruited by the employer from abroad. The 30% scheme must be agreed separately in the employment contract between an employer and an employee. It is recommended that it be stated in the employment contract that award of the 30% scheme is a discretionary power of the Tax Authorities to prevent the employee having to be paid financial compensation in case of nonaward. The employer must be registered as a withholding agent for employment taxes. The employee must have specific knowledge and skills that are scarce on the Dutch labour market. This knowledge and skills is moreover assumed if this is an employee who works in the middle or higher management of the company for a minimum of 2.5 years and is seconded within the same group of companies. The 30% scheme may be applied for a maximum period of ten years. The 30% scheme may, depending on the arrangements made on this between employer and employee, be applied in two ways: 1. The 30% scheme is on top of the employee s gross salary. 2. The gross salary is reduced by the 30% scheme. Example method 1 (30% on top of the salary) Example method 2 (salary 30%) Gross salary 1,000 Gross salary 1, (30%) = 700 Notional tax rate 50% Notional tax rate 50% Taxable salary 1,000 Taxable salary 700 Tax Tax Net salary of employee 500 Net salary of employee 350 Expense allowance (30%) Expense allowance 300+ Net income of employee 800 Net income of employee 650 Employer costs 1,300 Employer costs 1,000 The examples show what the consequences are for both employer and employee when using one or other method. It is important here to make clear agreements on this. 5. Tips to remember In practice we come across a number of things that are not so much new from 1 January 2011, but regularly are not applied properly or are missed: Pension policy and introduction of Pension Register; Pension policy In recent years many alarming reports have been published on the level of cover of pension funds. Since 2007 the new Pensions Act came into force as the successor to the Pensions and Savings Funds Act. The aim of this act is to safeguard pension commitments. The Act lays down stringent requirements for pension funds, such as providing uniform and clear information, but also imposes an extra duty of care on employers. 10

11 Duty of care If you have a pension scheme for your employees then on the basis of the Pensions Act you are obliged to pay the pension premiums on time. In case of late payments the pension fund or the pension insurer reports the payment arrears directly to your employees. If you decide to waive the option to offer your employees a pension scheme, you are obliged to inform your employee regularly in writing of that decision. The name of the site where from 2011 every Dutch person can view their AOW (extra governmental income) and pension, is mijnpensioenoverzicht.nl. The name pension register is often used in the media for this. Pension register is however the name of the Pension Register Foundation (Stichting Pensioenregister) that is responsible for the creation of the site. Around 600 Dutch pension funds, insurers and the Social Security Bank are represented in this foundation. Everyone can log in to with their DigiD (and not with their BSN (Civil Service Number), as is sometimes wrongly reported). There you can check the status of your AOW and pension. You can also consult how much survivors pension there will be after death. Tip Submit a waiver declaration to your employees and have this signed seen by. When waiving partner s pension it is advisable that you notify your employee and their partner of this in writing annually. In this way you can at all times show that you have met (this part of) your duty of care. 11