What is the employment tax credit (arbeidskorting)?
Employment tax credit (or employed person’s tax credit)
A taxable person is entitled to the employment tax credit if he/she receives one of the following types of income:
- salary / wage;
- business profit;
- result from other activities.
The income must be earned with current work. So it is not applicable on unemployment benefits, long term disability benefits and pension payments for example.
The employment tax credit was introduced to compensate the employee for certain work related expenses which could be made but were not reimbursed. Before the tax credit was introduced the employees could deduct the costs (for a period for a fixed amount) but this led to many court cases. And so a much more straight forward system was introduced. The tax credit is also more fair since it depends less on the applicable tax rate.
The tax credit was also made applicable to persons with self employed income (business profit and result from other activities) although these persons can deduct their expenses though, unlike employees.
The amount of the employment tax credit depends on the amount of the total work related income and the maximum amount of the tax credit.