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The labour expense regulation is a new concept to ascertain if settlements and distributions are taxable or not. Beginning in 2015, it is obligatory to use this regulation. In the meantime, employers can choose to still use the old regulations for settlements and distributions. If you still apply the old regulation, it is recommended to make the necessary steps for the upcoming switch to the labour expense regulation (2015).
Among this regulation falls an expenditure of maximum 1,5% of your total fiscal salary (“free space”) on non-taxable settlements and distributions. Within the labour expense regulation, the Dutch government discerns four(4) categories for non-taxable settlements. With regards to the settlements that are excluded from this, 80% end-tax is applicable. See the schematic chart below.
During 2014 there will be a transitional period where you can chose between the old regulations with regards to benefits and expenses, or choose to apply the new labour expense regulation. This includes the ability for you to still utilise the rules of engagement regarding to the free settlements and distributions. In case you wish to use the labour expense regulation for 2014, we kindly request you to pass this information through to us.
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