An employer can annually spend a set amount on untaxed allowances and benefits in kind. That amount is in 2023 3.0% per cent of the fiscal wage bill of employees up to €400,000 and 1.18% over the excess, the so-called free space. This is regulated in the so-called work-related costs scheme. Does an employer give discounts to staff on products from its own company? Then there may be a targeted exemption that is not taken from the free space.
Targeted exemption: conditions
If an employee receives a discount or compensation when purchasing products from the employer’s own company, a targeted exemption applies if the following three conditions are met:
- The products are not strange to the sector.
- The discount or allowance per product is no more than 20% of the market value of that product.
- The discounts or allowances in the calendar year together do not exceed € 500 per employee. This also applies if an employee joins in the course of the year.
Does an employee receive discounts above the maximum of € 500 or above the maximum of 20% per product? Then the excess is the employee’s wages. The employer may also choose to designate this wage as final taxable income. It will then be charged to the free space. If the free space is exceeded, the employer will owe 80% final tax.
Not carried forward to next year
If an employee receives less than the maximum of €500 per year, the unused part of the exemption may not be carried forward to a subsequent year.
Fair market value
The fair market value of a product is the selling price including VAT. The selling price may be based on the lowest price you can find in the market. Prices on the internet are also included here. Shipping costs increase the fair market value. For the selling price, we look at the market situation at the moment of enjoyment.
Deduction regular customer discount
If an employee receives a discount that others (non-employees) also receive, this discount does not constitute wages and can remain untaxed.
Also for ex-employees
Does an employer also give discounts on products from its own company to employees who have left its employment? Then the targeted exemption also applies here.
The scheme also applies to branch-specific products of an affiliated company of the employer.
An affiliated company is:
- a company in which the employer has at least 1/3 interest;
- a company in which the employer holds at least 1/3 interest;
- a company in which a third party has at least 1/3 interest, while this third party also has at least 1/3 interest in the employer.
Example jeans clothes shop
An employee works in a clothing shop and buys a pair of jeans. At the time of purchase, the price of these jeans is €100. His employer gives him a 50% discount. A week later, the price of the same pair of jeans is €60. What falls under the targeted exemption?
The fair market value of the jeans at the time of enjoyment is €100. A discount of up to 20% is exempt. This is € 20.
The rest of the discount of €30 is wage for the employee. The employer can also designate this as final taxable income. It then falls under the free allowance. If the free allowance is exceeded, the employer will owe 80% final tax.
Example annual ticket amusement park
An employee works in an amusement park and receives a free annual pass from his employer. With this annual pass, he can also visit the park in his spare time. Normally, an annual pass costs € 150. What is covered by the targeted exemption?
An annual pass is a company product. 20% of the value of the annual pass is exempt. This is € 30.
The rest of the value, i.e. €120, is salary for the employee. The employer can also designate this as final taxable income. It then falls under the free allowance. If the free allowance is exceeded, the employer will owe 80% final tax.
Example voucher supermarket
Employees working in a supermarket receive a 10% discount on all products in the shop. They first pay the full amount. The employer records the discount with each purchase. At the end of the year, employees receive the discount in the form of a voucher. The value of this voucher is the discount they have accumulated during the year. The maximum discount is €500 per year. Employees can only spend this voucher on products from the supermarket. Is this voucher targeted exempt?
The employer may choose the form in which he gives the discount. He may give the discount at the time the employee buys the product or pay out the total discount in one lump sum at the end of the year. The voucher therefore falls under the targeted exemption. The employer meets the conditions of the targeted exemption.
More information about the work-related costs: The work-related costs scheme (WKR)