The end of the year also means a busy time for HR professionals and payroll administrators: the 2024 year-end and the start of 2025 are approaching. Each year brings (new) areas of concern that you might need to consider before the end of the year. In this article, our Employment Advisory experts discuss a number of key developments and issues in the areas of labour law, wage tax, HR and salary administration.
Work-related expenses scheme (‘WKR’)
The first bracket of the discretionary margin (‘vrije ruimte’) of the Work-related Expenses Scheme (‘werkkostenregeling’ or ‘WKR’) is 1.92% over the first €400,000 of the wage amount in 2025, just as in 2024. Above €400,000, the current rate of 1.18% will continue to apply in 2025. Despite the percentages remaining the same, it is important to pay attention to the WKR around the turn of the year. Read more about this in our Year-End Pointers for Employers!
Please note: the House of Representatives recently approved the 2025 Tax Plan with a number of amendments. This includes a proposed increase of the 2025 percentage over the first €400,000, from 1.92% to 2%. The Senate is expected to vote on the Tax Plan on 17 December 2024.
Do you want to make the best use of the available discretionary margin? Our Employment Advisory experts would be happy to explain how! Read more about the WKR, our webinars and WKR training courses here.
Public transit exemption
Since 1 January 2024, it is possible to provide a public transport pass or off-peak fare ticket to employees without this being considered a taxable benefit. Although the employee must actually use the employer-provided public transport pass for (some) business travel in order to meet the requirements for exemption, there is no longer any restriction on private use of the pass.
Additionally, the 2025 Tax Plan includes a proposal that the exemption will no longer be limited to public transport in the Netherlands from 2025 onwards.
Premium rules adjustment for additional work in permanent contracts
As of 1 January 2025, the cost of unemployment premiums (‘WW-premie’) for permanent contracts with more hours, will go down. The measure will contribute to internal agility for companies and reduce their expenses.
As a result of ‘premium differentiation’ in the Unemployment Act (‘WW’), employers pay low unemployment premiums for permanent contracts with a fixed number of working hours, that are agreed upon in writing and high unemployment premiums for flexible contracts. To give employers flexibility, employees are allowed to work 30% more than the hours of the permanent contract. If they work more than an average of 30% extra above the fixed number of working hours, the high unemployment insurance rate will apply for that whole year (i.e. retroactively).
Larger employment contracts in which an employee works an average of 35 hours or more per week are exempted from this rule. This exception will now be extended to contracts averaging more than 30 hours a week. This will increase the internal agility of companies, while employees retain the security of their contract.
Low-income benefit (‘LIV’) abolished in 2025
The low-income benefit (‘LIV’) is an allowance for employers who employ low-wage workers. The youth LIV was already abolished as of 1 January 2024 and, as of 1 January 2025, the regular LIV will also be abolished. The Dutch Tax Authorities will pay out the LIV for 2024 in 2025.
Tax deduction for company delivery vehicle
For the private use of delivery vehicles provided by an employer to an employee, this must be added as a taxable benefit (‘bijtelling’) for the employee in the salary administration. In the case of delivery vehicles that are continuously used on an alternating basis, the private use of the delivery vehicle per employee is difficult to determine. The employer can then choose to buy off this benefit through a final levy, provided the conditions are met. This final levy is € 300 per delivery vehicle in 2024 (as in previous years). However, the Tax Plan 2025 proposes increasing the final levy at source to € 438 in 2025. This amount will be indexed annually as of 2026.
Taxable benefit for electric cars
Electric cars are subject to a reduced taxable benefit rate for list prices up to € 30,000. This rate is 16% in 2024, and it will be 17% as of 1 January 2025.
For the part of the list price above € 30,000, a 22% taxable benefit rate will continue to apply, as in 2024.
Adjustment of 30% ruling: reduction to 27%
Last year, the 30% ruling for incoming and outgoing employees was cut back. Since 2024, the maximum tax-free allowance has been 30% for the first 20 months, 20% for the subsequent 20 months, and 10% of the salary for the last 20 months. There is a transitional regulation for existing cases.
A proposal was made on Budget Day to reverse the phase-out. Instead of this, the scheme will apply as of 1 January 2027 at a fixed rate of 27% for the entire maximum term of 60 months. The salary criteria will also be raised. There are transitional rules for employees who applied the 30% ruling prior to 2024. It is not currently clear whether both the Dutch House of Representatives and the Senate will agree to this change. But practically speaking, the maximum tax-free allowance will remain 30% of taxable wages in 2025.
Please note: the abolition of the partially non-resident taxpayer status as of 1 January 2025 was already approved last year. This has no impact on employers, but does affect the tax position of employees who only started applying the 30% ruling after 31 December 2023.
Application of Wet DBA and Wet VBAR for freelancers
The Employment Relationships Deregulation Act (Wet Deregulering Beoordeling Arbeidsrelaties, Wet DBA) was introduced several years ago to provide clarity on whether a self-employed individual without employees (‘ZZP’er’) should be regarded as an employee. An ‘enforcement moratorium’ has been in place in recent years, which meant the law was only enforced in exceptional situations.
The enforcement moratorium will end on 1 January 2025. This means that, from then on, the Dutch Tax Authorities will start checking whether a ZZP’er should be considered an employee, and apply the rules on this basis.
At the same time, new legislation around hiring freelancers is still pending. The Work Relationship Assessment and Legal Presumption Clarification Act (Wet verduidelijking beoordeling arbeidsrelaties en rechtsvermoeden, ‘VBAR’) should provide the long-awaited clarity. The VBAR aims to combat false self-employment by further fleshing out the open standard of ‘being employed by’ on the basis of recent court decisions. Further, it introduces a ‘legal presumption’ under which workers with an hourly rate lower than € 32.24 per hour are deemed to perform their work under an employment contract. There are three essential factors that matter when distinguishing between salaried employment and a ZZP’er:
work-related management,
organisational embedding, and
own expense and risk.
For now, contract parties will still have to make do with the Wet DBA and all the uncertainty it brings.
Tax and labour law risks among freelance workers
If the Dutch Tax Authorities come to the conclusion that there is an employment contract instead of a contract for services, there is a tax risk that additional wage taxes and contributions are levied on the amounts paid to the ZZP’er, plus statutory interest and penalties. This creates a significant financial risk for the client/employer. The additional levy will be applied with retroactive effect to 1 January 2025. In cases of obvious false self-employment, retroactive taxation can also be imposed for periods prior to 1 January 2025. There is also a labour law risk: at some point (often in case of long-term illness or termination of the assignment by the client), the ZZP’er may claim an employment contract, including sick pay, job protection, pension accrual, and so on.
Map out the hiring of ZZP’ers, make sure you recognise potential risks in time and take measures to mitigate them if necessary. This issue will require your attention before the end of 2024. Our experts would be happy to help clarify your position.
Want to know more?
Would you like to know more about important issues for employers regarding the 2024 year-end and the start of 2025? We discuss some key issues in our Year-End Pointers.
Do you have any questions? Our advisors will be happy to help!
Legislation and regulations in this area may change. (Legislative) changes may have taken place after the publication of the articles mentioned above. We recommend that you consult with your advisor at Baker Tilly about the potential impact.
