The Netherlands tax authorities have recently published their reply to the following question (unauthorised English translation): ?When negotiating a new employment agreement for example professional football players often make use of the services of specified agents. May the employer tax-free reimburse these intermediary and negotiation costs to the employee??
The reply of the tax authorities is: yes, these costs may be reimbursed tax-free. The permission is limited to the costs in as far as they can be attributed to the new employment. According to the Netherlands tax authorities this view is based on the provision in the Netherlands wage tax which allows an employer to make tax-free reimburse costs such as the costs made by a potential employee in connection with interviews etc (Article 15, letter a of the Wage Tax Act 1964).
It has to be noted that the positive reply is limited to the costs in relation to obtaining the new employment. In Netherlands practice there are apparently disputes about the treatment of ongoing fees, which for example a professional football player has agreed with his agent. The tax authorities take the view that these costs may not be reimbursed tax-free by the employer. In other words these costs would in their view have to be treated as salary of the employee concerned.
It is to be noted that the legislative provision mentioned by the tax authorities does not at all merely refer to costs of a job interview, but makes a general reference to 1) reimbursements to cover costs, burdens and depreciations connected with the proper fulfilling of the employment and 2) to other reimbursements in as far as they are according to the general opinion in the society not experienced as a benefit from the employment. It is not at all clear whether under these provisions agent fees would have to be considered as wage of the employee?s, and it could very well be argued that these fees are according to the standards mentioned not to be characterised as benefits for the player concerned. On the other hand, is as far as the services of the agent have no relation with the employment (e.g. managing the equity of the player, taking care of strictly personal matters), the argument could possibly be valid.