EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Expert Group opinion on the customary criterion - €2,400
The Expert Group has provided further clarification in an opinion of how the "efficacy threshold" (as it is termed) should be applied. The examples included in the Expert Group opinion clarify how the tax authorities assess the limits of the "efficacy threshold". It is expected that the Tax and Customs Administration will strictly enforce this limit in payroll audits.
In principle, all allowances and employment benefits granted to an employee constitute salary. The allowances, employee benefits and provisions designated by the employer responsible for tax withholding as final levy amounts to be charged to the tax-free budget of the work-related costs scheme are exempt, provided that they meet the customary criterion. It is not necessary to check that the customary criterion has been met if the efficacy limit set per employee per year by the tax authorities is not exceeded. The Payroll Tax Handbook 2025 includes what is referred to as an "efficacy limit" of €2,400 in this context. This figure is therefore intended as a safe haven.
What is striking about this Expert Group opinion is that in order to determine whether the efficacy threshold has been exceeded the designated wage elements that are charged to the tax-free budget of the work-related costs scheme must be taken into account as a whole. No distinction is made between different types of wage components. It is not new that the Tax and Customs Administration assess in this way, but this approach has now been explicitly stated by the tax authorities for the first time.
What is striking about this Expert Group opinion is that in order to determine whether the efficacy threshold has been exceeded the designated wage elements that are charged to the tax-free budget of the work-related costs scheme must be taken into account as a whole. No distinction is made between different types of wage components. It is not new that the Tax and Customs Administration assess in this way, but this approach has now been explicitly stated by the tax authorities for the first time.