Tax Efficient Bonuses, Flexi-Work, Ecommerce And Pensions All Reformed As "Summer Pact" Comes Into Force

On January 1, 2018, many of the provisions of the so-called “Summer Pact” came into force, introducing a number of tax and employment law measures. It is expected that the implementation of the remaining measures will follow swiftly.

The main changes introduced by the Summer Pact are:

1. Profit Bonus

A new tax-efficient profit bonus scheme is introduced for employees (apart from certain executive-level employees). Certain criteria need to be met for the scheme to benefit from the favorable tax rates. The scheme must either be an identical profit bonus (meaning that all employees receive the same amount or percentage of the remuneration) or a so-called categorized profit bonus (depending on objective criteria, such as seniority, function, etc.).  The total profit bonus must not exceed 30 percent of the total gross wage bill. Note too that to qualify for the favorable tax treatment the profit bonus cannot be used to replace existing remuneration or benefits.