Abolition of Dutch tax exemption for staff discounts requires reassessment of benefits

Proposed measure and implications

The Dutch work-related costs scheme (werkkostenregeling; "WKR") enables employers to provide reimbursements and benefits to employees on a tax-efficient basis by allocating these to a discretionary margin (the so-called "free space"). The WKR includes various specific exemptions that allow certain types of remuneration to be provided tax-free, without impacting the available free space. 

One such exemption relates to discounts on products from the employer's own industry (branch-specific products). Under the current exemption, employers can grant employees a tax-free discount of up to 20% of the fair market value, capped at EUR 500 per employee per year. The Dutch government has proposed abolishing this specific exemption as of 1 January 2027. This proposal forms part of the government's 2027 Budget which is still pending parliamentary approval, but such approval is typically obtained. If the exemption is abolished, employee discounts on branch-specific products will in principle constitute taxable salary. 

Employers may still allocate such discounts to the available free space, subject to conditions (such as whether the discount can be considered 'customary'). However, particularly where employee discounts form a material part of the overall remuneration package, this is likely to result in the free space being exhausted (more quickly), increasing the risk of triggering the 80% final levy (eindheffing) on any excess. In addition, the abolition of the exemption will require employers to maintain more precise records of discounts granted, as the specific thresholds that currently apply under the exemption will no longer be available as a reference framework.

Changing employment conditions

Discounts on the employer's own products, such as software, are frequently offered as an attractive secondary employment condition. Unilaterally change employment conditions is generally difficult in the Netherlands. In general, the consent of the employee is required and only in limited circumstances can an employer unilaterally amend employment conditions. The legislative change alone may not constitute sufficient grounds to amend employment conditions. After all, offering the benefit remains possible, albeit subject to a high additional levy. 

Employers should therefore assess in a timely manner whether their current employment conditions or policies require adjustment. We advise employers to prepare as follows: 

• Assess the current use of employee discount and quantify the financial impact of the abolition of the exemption.
• Evaluate whether the available free space under the WKR is sufficient to absorb the allocation of employee discounts.
• Review and, where necessary, amend employment contracts, policies and staff discount schemes, taking into account Dutch employment law obligations. 

Osborne Clarke comment

While the proposed abolition of the WKR exemption for employee discounts is a fiscal measure, its practical impact extends well beyond tax. For HR specialists, the key challenge lies in reassessing the employee discount package and managing the process of adjusting employment conditions where necessary. A proactive approach avoids surprises. 

The employment team at Osborne Clarke can help clients analyse their current practices, assess the employment law and fiscal implications, and advice on a tailored approach to address the changes ahead.