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Higher Tax-Free Commuting Allowance From 2023 in the Netherlands

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The Dutch Cabinet is considering increasing the tax-free commuter allowance one year earlier than originally planned. This measure was part of the recent Spring Memorandum and partially incited by the sharp rise in fuel costs in Spring 2022.

Commuting allowance in the Netherlands

Currently, employers can reimburse commuting employees up to 19 cents per kilometre, tax-free. This maximum amount is set to increase to 21 cents per kilometre in 2023 and possibly 23 cents in 2024. The exact amounts should be confirmed later this year. This would be the first increase in the mileage allowance in the country since 2006.

The proposed increases were urged forward by the House of Representatives following the sharp increase in fuel prices this Spring.

Employers can choose whether to increase mileage allowance

While the government sets the maximum tax-free travel allowance, it is up to the employers' discretion whether to apply it. This means that companies can choose to reimburse their employees, the maximum tax-free rate, or to apply a lower or higher rate.

State Secretary Marnix Van Rij has called upon companies to make use of the new reimbursement caps to ease the financial burden of commuting on workers.

Mileage allowance increase set to cost government 200 million euros

Bringing forward the mileage allowance increase by a year is expected to cause an estimated loss of income of 200 million euros for the government. A cost that the government had originally planned to sustain starting in 2024.

This increase of the tax-free commuter allowance opens up the discussion regarding the “new way of working”. It is hoped to make it less of a burden for employees to work from the office, more often.

The decision was made to raise the allowance after employees expressed concerns regarding the cost of commuting. A cost which many employers have declared themselves willing to cover if it means getting more people back in the office.

Measures to reduce the cost of fuel

Back in March, the House of Representatives first examined increasing this travel allowance following the sudden increase in energy and fuel prices which have sharply affected the finances of those commuting by car.

While excise duties on fuel were reduced earlier this year, this did not fully cover the prior increases. As a result and to attempt to contain fuel cost increases, the government will be reducing the VAT rate of gas and electricity. Starting July 1st 2022 and until the end of the year, the VAT rate of natural gas, electricity and district heating will be reduced from 21% to 9%.

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Posted on 30 May 2022

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