Netherlands: Request by tax authorities for information from comparable taxpayers (court decision)

A case concerning whether net share bonuses can qualify as part of the final levy for the purposes of the work-related costs rules

Request for information by tax authorities from comparable taxpayers

The Supreme Court (Hoge Raad) on 12 November 2021 in a case concerning whether net share bonuses can qualify as part of the final levy for the purposes of the work-related costs rules (werkkostenregeling) addressed the request by the tax authorities for information from comparable taxpayers. The court upheld the manner used by the tax authorities to request this additional information.


The employer for several years had offered a share plan to members of the group council, whereby they were given the opportunity to use their gross bonus to buy shares in the company.

If the employees who had taken advantage of this opportunity were still employed after three years, they were awarded a number of shares for nil consideration. The tax on these shares for nil consideration was paid by the employer.

As of 2012, the employer switched to the work-related costs rules, and in 2012 and 2013, it treated the benefit arising from the shares awarded for nil consideration as part of the final levy for the purposes of the work-related costs rules. Various other salary benefits (such as Christmas gifts and staff activities) were also treated as part of the final levy in 2012 and 2013.

To the extent that the fixed exemption in the work-related costs rules of 1.5% (2012) and 1.4% (2013) was exceeded, the employer reported and remitted a final levy of 80% in 2012 and 2013. The Dutch tax authorities disagreed with this treatment, and made supplementary assessments. The tax authorities believed that the awarded shares could not pass the standard practice criterion (gebruikelijkheidstoets) of the work-related costs rules, particularly in view of the amount of the provisions.

In the lower courts, a district court held for the taxpayer, whereas a court of appeals held that any interpretation of what is standard practice under the work-related costs rules must take account of generally accepted common standards. The taxpayer appealed to the Supreme Court.

The Supreme Court formulated a framework for determining compliance with the burden of proof, and referred the case back to the appeals court. In the remanded case, the appeals court held that the standard practice criterion did not apply and that the manner in which the Dutch tax authorities had requested information from comparable taxpayers pursuant to a provision of the tax law was appropriate.

The case was appealed again, and this time the Supreme Court concluded that the request for information made by the tax inspector was permitted. According to the Supreme Court, in requesting information from external parties, the tax inspector did not make improper use of the authority granted, and the taxpayer had not convincingly demonstrated that the tax inspector obtained the information in a way that was counter to what may be expected from an authority acting appropriately that this use must always be regarded as inadmissible.

KPMG observation

With this judgment by the Supreme Court, it could be difficult for employers to determine whether a particular reimbursement or provision falls within the bounds of what is standard practice under the work-related costs rules.

Read a November 2021 report prepared by the KPMG member firm in the Netherlands


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