Netherlands: Treatment of bonus shares under work-related costs rules

Netherlands: Treatment of bonus shares

The Court of Appeals (The Hague) on 11 August 2020 rendered a judgment in a case concerning whether bonus shares can be allocated under the fixed exemption of the work-related cost rules.*


Related content

*Work-related costs rules (werkkostenregeling—WKR).

The case was referred back to the Court of Appeals after the Supreme Court issued its judgment in July 2019. In its judgment, the Supreme Court formulated reference points for applying the standard practice criterion (gebruikelijkheidtoets). Read TaxNewsFlash

The Court of Appeals followed the framework set by the Supreme Court in its judgment.


In this case, an employer had for several years been offering a share plan to board members. Under this plan, they could use their gross bonus to purchase 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 a nil consideration was paid by the employer.

As of 2012, the employer switched to the work-related costs rules, and in 2012 and 2013, regarded the benefit arising from the shares awarded for a 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% and 1.4% was exceeded in 2012 and 2013, respectively, the employer reported and remitted a final levy of 80% in 2012 and 2013.

The Dutch tax authorities disagreed with this treatment, and imposed supplementary assessments because, in the opinion of the tax authorities, the awarded shares could not pass the standard practice criterion of the work-related costs rules, particularly in view of the amount of the provisions.

A lower court held in favor of the taxpayer, but the appellate court found 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.

Court of Appeals

According to the Court of Appeals, in determining whether a provision is customary (also in 2012 and 2013, the years to which the dispute relates), both the nature and the size of the provision are central. Furthermore, it must also be standard practice that the employer bears the tax on the provision. An internal inquiry by a tax inspector within the Dutch tax authorities is not sufficient to determine whether a provision is customary. Even if this were otherwise not known within the Dutch tax authorities, companies may have share plans of which the benefits are designated under the WKR.

According to the Court of Appeals, it was not convincingly demonstrated that, within its own organization, the taxpayer awarded the same net bonuses, in type and amount, to employees other than the members of the group council. The standard practice is thus limited to members of the group council.

In addition to internal inquiries, the Dutch tax authorities also made external inquiries to 88 companies. Although this information was not made fully available to the taxpayer, the Court of Appeals was of the opinion that the inquiries made by the Dutch tax authorities were sufficiently representative. The Court of Appeals allowed the Dutch tax authorities to use the authority to oblige companies to answer the Dutch tax authorities.

The Court of Appeals also found that the external inquiries made by the Dutch tax authorities were representative enough to be able to decide on the standard practice of net bonuses. Because the Dutch tax authorities did not limit their inquiries to the years 2012 and 2013, this increased the likelihood that the question whether bonuses were awarded in any year would be answered affirmatively. The result of the inquiries showed that more than half of the companies approached awarded bonuses, but not of comparable size. Furthermore, the bonuses were also not designated as part of the final levy. Only one company awarded a bonus that was designated as part of the final levy under the work-related costs rules. The amount of the net bonuses awarded under the bonus scheme at the particular company (the bonus amounts were limited to €500 - €1,250) was not comparable to the shares awarded at the taxpayer.

In the years before 2012, the tax on the share bonuses was borne by the employer. The benefit was remunerated in the payroll records of the individual employee. The Court of Appeals concluded that that previous provision did not mean that the provision was standard practice under the WKR and for two reasons:

  • It was remunerated in the payroll records of the individual employee
  • The employer derived a benefit if it was taxed at 80% instead of 108.3%

The Court of Appeals dismissed the appeal against the 2012 supplementary assessment and upheld the 2013 supplementary assessment. 

Read an August 2020 report prepared by the KPMG member firm in the Netherlands

© 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal