Budget Day 2025: measures for employers and employees

Pseudo-final levy on fossil fuel passenger cars 

From 2027, a pseudo-final levy will be introduced in wage tax for fossil fuel passenger cars made available by an employer to an employee for private use (including commuting). Only zero-emission passenger cars are exempt from the levy. This is intended to encourage the transition to a more sustainable business fleet in order to bring the agreed climate targets closer.   

The pseudo-final levy is payable by the employer and may not be passed on to the employee. This final levy is levied in addition to the regular additional tax liability for the employee. The rate of the pseudo-final levy is 12 per cent of the value of the car (catalogue value). However, for cars that are 25 years old or older, the pseudo-final levy is calculated on the market value of the car. If an employer has made a passenger car available to an employee before 2027, a transition period until 17 September 2030 applies. 

Clarification for the bicycle scheme: no additional tax liability for shared bicycles 

The bicycle scheme in the wage tax will be adjusted for bicycles made available that are parked at home no more than 10 per cent of the time. For such bicycles, no additional tax liability of 7 per cent of the value of the bicycle will apply; instead, the additional tax liability will be set at zero. The aim of this proposal is to remove any uncertainty about the application of the additional tax liability for shared bicycles (such as hub bicycles, public transport bicycles and other shared bicycles). The proposed amendment does not differentiate between shared bicycles and other bicycles not stored at the employee's place of residence, or only stored there incidentally. This amendment will be implemented retroactively as of 2020. 

Reduction in untaxed reimbursement for extraterritorial costs (ETK scheme)  

With effect from 2026, the so-called ETK scheme will be reduced for incoming employees. The ETK scheme enables employers to provide tax-free reimbursement to employees for extraterritorial costs incurred during temporary international assignments. From 2026, additional living expenses (cost of living / COLA allowance) and additional telephone costs for private purposes with the country of origin will no longer be reimbursed tax-free. The reduction of the ETK scheme will not affect the expat scheme (formerly known as the 30% ruling). It has already been announced that the percentage of the expat scheme will be adjusted from 30 per cent to 27 per cent as of 1 January 2027. 

RVU threshold exemption remains in place and employer's final levy rate increased 

If an employer offers a financial arrangement that could be used by the employee as a bridge to the state pension age, this arrangement may be classified as an Early Retirement Scheme (‘RVU’). In addition to the regular levy, the employer is liable for a final levy of 52 per cent. The imposition of the final levy encourages employees to continue working until they reach state pension age. The final levy is not payable insofar as the RVU threshold exemption applies. This exemption applies if the employee is no more than three years away from the state pension age and the compensation does not exceed an amount equal to the state pension benefit. The exemption would initially apply until 1 January 2026, but this bill proposes to continue the exemption. This proposal will make the RVU threshold exemption permanent. 

For 2026, it is also proposed to increase the threshold of the exemption by € 300 gross per month. This amount will be indexed annually. The increase in the RVU threshold exemption will only apply to the future and will not have retroactive effect. Finally, it is proposed to gradually increase the rate of the final levy for RVU above the RVU threshold exemption with 57.7 per cent in 2026, 64 per cent in 2027 and 65 per cent in 2028. 

Technical tax issues with ‘invaren’ under the Future Pensions Act  

The Future Pensions Act (‘Wtp’) came into force on 1 July 2023. As a result, existing pension schemes must be amended. Accrued pensions will also be transferred via an internal collective value transfer to a pension scheme that meets the conditions applicable as of 1 July 2023, also known as ‘invaren’. In practice, tax issues have been identified in relation to this ‘invaren’ with regard to bridging pensions that have commenced, early retirement pensions that have commenced and orphan's pensions that have commenced or arisen prior to the transition to the Wtp. It is proposed that these issues be resolved in such a way that these pensions remain tax-compliant even after the ‘invaren’. In line with these tax issues, it is also proposed to amend the transitional law for surviving dependants’ bridging pensions that have commenced at the time of ‘invaren’. It is also proposed that early retirement pensions commenced before the transition to the Wtp (within the statutory limits) can also be paid as variable benefits. This means that benefits from an early retirement pension scheme may not only be fixed benefits, but may also be variable (depending on, among other things, investment returns).