Tax agreements on lump sum allowances - From now on, the ruling commission will decide on the lump-sum allowances concerning costs proper to the employer

The tax authorities have confirmed to us that the internal administrative instructions have officially been modified as from 1 May 2016, whereby solely the ruling commission will have the power to decide on lump-sum allowances. It will thus no longer be possible to conclude agreements on this subject with your local tax office.

Allowances paid by the employer to the employees as a reimbursement for costs proper to the employer are not classified as remuneration from a tax point of view. The law does not define the concept of “cost proper to the employer”, but in general terms it concerns expenses that have to be paid by the employer and which the employee has effectively incurred for one reason or another within the exercise of his function. These costs can be reimbursed either on the basis of the actual cost (based on supporting documents) or on a flat-rate basis (lump sum allowance)..

Many companies choose to reimburse these costs for the employer on a flat-rate basis. The setting of the lump-sum allowance is a question of fact. The amount of the lump-sum allowance depends on the function of the employee and the duties he has within the company. To avoid any risk of reclassification as taxable remuneration, it was possible, until recently, to apply for a ruling to the ruling commission or your local tax office. 

However, local tax offices have for some months been advising that ruling requests, as well as requests for an extension, should be submitted to the ruling commission. It has been confirmed to us that the tax administration will officially apply this way of working as from 1 May 2016.

From now on, it will thus no longer be possible to conclude an agreement on lump-sum allowances with your local tax office. In order to achieve uniformity, solely the ruling commission will handle these files. It should be noted that the ruling commission has drawn up guidelines and objectives in order to apply similar lump-sum allowances per function and per sector. Furthermore, it has published a draft of a ruling request on its website that indicates the information it wishes to be included. In this way, the ruling commission requires the submission of substantiated and well-founded applications. We therefore advise you to start early with the preparation of your ruling request. 

> Action point
Start early with the preparation of your ruling request on lump-sum allowances. If you have already concluded an agreement with your local tax office, please note that it will no longer be able to help you to obtain an extension if your existing agreement were to expire. In that case, you will have to initiate a procedure with the ruling commission. Please keep in mind that the ruling commission appears to be quite strict and strives for uniformity within lump-sum allowances.