Exemption from withholding tax remittance for shift and night work: a changing framework calls for a new approach

In practice, we see that many organisations apply the scheme “as it has evolved”: historically introduced, technically implemented through payroll, and rarely fundamentally reassessed. That is precisely where the risk lies today.

Why a reassessment is needed today

In recent years, the framework surrounding shift and night work has been substantively revised, with significant consequences for the application of the exemption. It has recently been reaffirmed that not only the type of work, but also the organisation and scale of the work performed per shift are decisive. This requires more substantiation than before and makes the assessment highly fact- and context-dependent.

At the same time, a temporary relaxation measure (the so-called “bis variant”) is currently in place, but only until 31 December 2026. What follows afterwards remains unclear today, although new legislative initiatives are expected during the course of 2026. This makes it the right moment to critically reassess existing applications.

Programme law introduces limitation of the tax benefit

One important development deserves particular attention. The federal government submitted a draft programme law introducing a so-called correction factor for all withholding tax exemptions, including those relating to shift and night work, alongside exemptions for, among others, research and development, inland shipping and merchant shipping. The mechanism aims to freeze the overall budgetary cost of these exemptions and neutralises the increase in costs resulting purely from nominal wage increases and the resulting higher withholding tax retained.

In concrete terms, the exemption percentage itself remains unchanged (22.8% for shift and night work), but the amount that effectively no longer needs to be remitted to the tax authorities will henceforth be multiplied by a correction factor:

• From 2027: correction factor of 97% (approximately 3% less benefit)
• From 2028: correction factor of 93.35% (approximately 6.65% less benefit)
• From 2029: correction factor of 95.9% (approximately 4.1% less benefit)

By way of illustration, for an annual salary of €50,000, the current benefit resulting from the exemption amounts to approximately €8,500 per employee per year. The correction factor aims to prevent this benefit from automatically increasing with inflation, thereby increasing the effective labour cost for employers. The measure would enter into force for remuneration paid or granted from 1 January 2027 onwards. Remarkably, the explanatory memorandum refers to a freeze during three consecutive years (2027 to 2029), while the actual legal text states that the correction factor of 95.9% applies “from 1 January 2029”, without an end date. In practice, the limitation therefore appears to become permanent in nature. As of today, the measure has not yet been definitively approved.

Labour law reforms regarding night work

In addition, the labour law framework surrounding night work is also evolving. The announced reforms, particularly for the distribution sector, reduce labour costs on paper by limiting the mandatory night premium over time. However, this labour law relaxation is not yet aligned with the tax framework.

Today, from a tax perspective, night work is still defined as work performed between 8 p.m. and 6 a.m. For the application of the tax exemption, this means that:

• Employees must perform at least one third of their working time within this time window
• And that a night premium of at least 12% must be linked to it

From a labour law perspective, this framework will change. As part of the relaxation of night work rules, the mandatory time window for night premiums in the distribution sector and related sectors (including e-commerce) will, for new employees from 1 June 2026 onwards, be limited to the period between 11 p.m. and 6 a.m. Work performed between 8 p.m. and 11 p.m. will therefore no longer automatically be considered night work for which a premium is mandatory.

At first sight, this change reduces labour costs, but at the same time creates tension with the tax framework, which remains unchanged for the time being. The tax definition of night work still starts from the time window between 8 p.m. and 6 a.m.

As a result, employers applying the labour law relaxation unintentionally risk:

• no longer meeting the tax conditions, or
• having the exemption for night work challenged.

The office of Minister Jambon has indicated that it is working on a solution, but to date no formal tax clarification has yet been issued.

What does this mean for your organisation?

For organisations with shift and/or night work, this raises several recognisable questions:

• Is our current application of shift or night work still defensible?
• Do we have sufficient supporting documentation, separate from payroll?
• What would be the impact if the tax authorities reviewed the past five years?
• Are we applying the scheme correctly, or are we actually missing out on savings?

It is important to note that tax audits are carried out retroactively by default. What today may appear to be a monthly deviation can accumulate over several years into substantial amounts.

Not only risks, but also opportunities

Attention often focuses on incorrect applications, but the opposite is equally relevant. We also see organisations that do not yet apply shift or night work, even though their activities could potentially allow it.

Without prior analysis, this opportunity often remains unused due to concerns about complexity or social impact. A well-considered feasibility analysis can provide clarity here: not to implement it automatically, but to make a substantiated decision on whether it is legally, fiscally and operationally workable.

Why proactive action is recommended

The combination of:

• the end of the relaxed “bis variant” at the end of 2026,
• evolving administrative positions,
• upcoming legislative changes (including those relating to night work),
• and the announced correction factor in the programme law, which will structurally reduce the effective benefit from 2027 onwards,

means that existing applications should today be critically evaluated, and that new applications are best assessed correctly in advance, before audits or legislative changes do so.

Are you unsure whether your organisation currently applies the exemption correctly, or whether opportunities are being missed? Moore has therefore developed a methodology and scan to evaluate this quickly in a targeted and substantiated manner. Do not hesitate to contact us if you are looking for support in this process.