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    How to declare third-party wages in the payroll tax return

    Withholding tax from wages paid by someone else

    The Dutch concept ‘loon van derden’ (third-party wages) is often used to refer to tips received by your employees. However, this concept actually encompasses much more than just tips. For example, money received through an Employee Relief Fund is also regarded third-party wages. For you as employer, it is important to not only know what counts as third-party wages, but also how to declare such wages in the payroll tax return.

    The concept of third-party wages seems simple in theory, but turns out difficult in practice. After all, what exactly can be regarded wages received by a third party? Simply put, any financial extras an employee receives through his/her employment that isn’t provided/paid by you constitute wages by a third party. And in some situations, tax must be withheld from such wages.


    If your organization has included agreements on third-party wages in the contract with an employee, such wages must be declared in the payroll tax return. For example: an employee’s contract states a monthly wage of € 1,250, but you only pay the employee € 1,100 per month. The employee must then earn the remainder of his/her monthly wage through extras from third parties, such as tips or a bonus. An example of the latter is a commission the employee receives (on the basis of his/her contract) from a supplier for the purchase of a certain volume in goods/services. In this scenario, € 1,250 in wages must be declared for the respective employee in the payroll tax return. In the event employees receive tips, these third-party wages are to be declared in the payroll tax return based on a predetermined amount. For example, the contract of an employee working in the hospitality industry states (s)he receives a monthly wage of € 1,200, even though the respective collective labor agreement states the employee is entitled to at least € 1,400 per month. The employee is then expected to make a predetermined amount of € 200 per month on tipping by customers. In this case, € 1,400 (i.e. € 1,200 + the predetermined amount of € 200 in tips) is then declared aa wages in the payroll tax return – even if the actual amount in tips received by the employee is lower. However, if you and the employee estimate that the amount in tips received will be higher, a higher amount must be declared in the payroll tax return. So, for example, if € 250 is expected in tips (instead of € 200), € 1,450 must be declared as wages in the payroll tax return.


    Any unexpected extras received by employees – i.e. tips or bonuses for which no agreements have been included in the employment contract – do not have to be declared in the payroll tax return. After all, you know nothing about these. The employee must declare any tips and other third-party wages in his/her own income tax return. Any third-party wages that have already been declared by the employer in the payroll tax return – i.e. the third-party wages for which agreements were included in the contract – may be subtracted here.
    Financial extras provided by a subsidiary company or another business part of a concern should also be declared in the payroll tax return, provided of course that your organization is legally aware of this. As mentioned before, benefits or money received through funds also count as third-party wages, but only if the respective fund is related to an employee’s employment. Examples include an Employee Relief Fund (providing money to employees who are financially struggling to make ends meet) or a schooling fund (providing money to cover the tuition fees of an employee’s child(ren)). Money received through such funds are third-party wages, even if the aforementioned ‘relation’ to an employee’s employment is indirect (as is the case with e.g. schooling funds).

    Christmas boxes and other gifts from a third party

    A well-known example of third-party wages is the situation in which a temporary worker (i.e. sent by an employment agency) receives a Christmas box from the organization he is working for; a gift also received by the regular employees. The respective organization will declare the gift as ‘eindheffingsloon’ (wages subject to a final levy), which means it will remain untaxed for the employee. For this final levy, the set percentages of 45% for gifts up to € 136 and 75% for gifts over € 136 apply. In this situation, the employment agency does not have to declare the Christmas box on the employee’s (i.e. temporary worker) payroll. The same rules applies to any other gifts or provisions given to temporary workers by the organization they are working for which are also given to the regular employees. The same rules also apply to the ‘zorgbonus’ (healthcare bonus; a bonus for employees working in the healthcare industry), for which a final levy of 75% applies.


    However, on the basis of the so-called ‘fondsenvrijstelling’ (funds tax exemption) certain benefits or money received through employment-related funds are tax-exempt. The following conditions apply:

    • In the last 5 years – or fewer years in the event your organization is not yet 5 years old – more money has been paid into the respective fund by your organization than by all employees together.
    • The benefit or money through the fund is not provided in the event of an adoption, childbirth, disability, death, or illness.
    • The employee receiving a benefit or money through the fund is not entitled to any tax- exempt facilities or provisions.

    If these conditions are all met, the benefit or money provided through the fund is tax-exempt and need not be included on the payroll (see below).


    Another type of fund relevant when discussing the rules on third-party wages is the ‘tijdspaarfonds’ (Leave Saving Fund). Here, employees deposit the monetary equivalent of any accrued leave into the fund after each wage payment. This deposit is made in a net amount. Employees can then withdraw the amounts deposited for the purpose of holiday allowance and to take extra-statutory leave, unscheduled days off work and workfree days reserved for short-term absenteeism. The withdrawal from the fund involves net wages because payroll tax was already withheld from the deposited amounts. In other words, the money does not constitute (taxable) third-party wages.
    Any third party paying wages to your employees is legally obliged to inform you of this in writing. Otherwise you cannot declare the respective wages (correctly) in the payroll tax return.

    In some situations, it does not count as third-party wages

    There are also situations in which employees technically receive wages from a third party, but these wages do not count as third-party wages. A somewhat dull example is a restaurant meal eaten by an employee working overtime and paid for by his/her organization. Technically, the restaurant is now the third party providing the untaxed wages (in kind) – i.e. the meal – to the employee. However, because the restaurant does so because they were commissioned by the organization and the latter also pays for the meal, this is officially not a situation in which third-party wages are provided. Another, perhaps better, example is a temporary worker receiving an advance payment of wages from the organization (s)he is working for, whereby these wages are offset against the invoice sent by the employment agency. Although the wages are now technically provided by the organization hiring the temporary worker, it is officially still the employment agency who pays the wages. Another example is a coach driver making a profit of the consumption sold on board. Technically, the passengers pay for this profit. However, because the coach company knows the driver will make a profit off the consumptions sold and permit the driver to do so, the profit is to be regarded as wages from employment (and not a third party). Of course, the coach driver must tell the employer how much profit was made, as the profit must be declared in the payroll tax return.

    In other words: in all the above examples, the wages provided are not third-party wages but wages from regular employment.


    Where to include third-party wages on the payroll depends on who pays these wages to the respective employee:

    • If your organization pays the third-party wages, the respective amount(s) need to be included in column 3: ‘Loon in geld’ (wages in money). Any third-party wages paid by your organization on behalf of a third party must thus also be included in this column. The same applies to benefits or money to an ex-employee provided through a fund.
    • If a third party (or third parties) pay(s) these wages – i.e. the third-party wages are paid directly to an employee – the respective amount(s) need to be included in column 5: ‘fooien en uitkeringen uit fondsen’ (tips and benefits through funds).

    Make sure to include on the payroll only third-party wages over which your organization must withhold tax, regardless of whom has paid those wages to the respective employee.

    You must also inform others when you are the third party

    If your organization pays wages (in kind) to temporary workers or other people not employed by your organization, you are legally obliged to inform their employer (or benefits agency) of the wages provided. The payment details and the ‘burgerservicenummer’ (personal identification number, as given on a Dutch passport) of the respective employee must then be provided. Consider a situation in which an employee receiving a benefit from the UWV (the National Institute for Employees’ Insurance and Regulations) comes to work for your organization as a trial position (no wages must be paid). If you then provide a company car to this employee, the UWV must be informed of any tax liability due to private use of this vehicle. The same applies to a company car used by a temporary worker, in which case the employment agency must be informed of any tax liability. Tax liability due to private use of a company car is regarded ‘taxable wages’ under Dutch law and must thus be declared in the payroll tax return of the respective employee.

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